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SAN FRANCISCO 
HISTORY CENTER 

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>an Francisco Public Library 

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REFERENCE BOOK 

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PR0GEEDINQ5 



-OF THE 



FIFTEENTH ANNUAL MEETING 



Fire Underwriters' 



ASSOCIATION OF THE PACIFIC. 



.^J<. 




San Francisco, February 17th and 18th, 1891. 

Printed by Order of the Association. 

1891. 






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rSre Omderwnters Association of tr>e I acific. 



FIFTEENTH ANNUAL MEETING. 

Tuesday, February 17th, 1891. 

Annual Report K. H. Nattnton, Secretary and Treasurer 

Report of Executive Committee H. K. Belden, Chairman 

Annual Address Bernard Faymoxyille, President 

Report of Library Committee Geo. W. Spencer, Chairman 

Attachments or Garnishments before Proofs 

are Made Peter Winne, of Denver 

Personal Friendships Among Insurance Men Bex. J. Smith 

Automatic Sprinklers S. A. Sanderson, of New York 

Ethics in Our Business R. V. Watt 

Are the Ethics of our Business an 

Evanescent Sentiment? Geo. F. McLellan, of Los Angeles 

Liability of Electric Light Companies to Insurance Companies 

for Fires Resulting from Electric Light Wires T. C. Van Ness 

A Letter on " Breach of Trust " A. B. Gunnison 

Discussion of Adjusters'' Charges and the Basis for 

Apportioning them 
By Sexton, Kinne, Grant and interested members 

Wednesday, February 18, 1891. 

Now and Then S. D. Ives 

Adjusters and Appraisers A.J. Wetzlar 

The Special Agent's Relation to the P. I. U C. Mason Kinne 

Upon the Element of Estimate in Loss Adjustment H. M. Grant 

Forms of Policies Wm. Sextox 

The Ills we Have W.J. Duttox 

California's Conflagrations Climatically Considered E. W. Carpexter 

The Measure of Manufacturer's Damage W. H. Lowdex 

The California Knapsack Geo. F. Grant, Editor 

Election of Officers 



{ire Underwriters' Association of the pacific. 



SAN FRANCISCO. CAL. 



OFFICERS FOR THE YEAR 1890. 



BERNARD FAYMONVILLE, President. 

W. II. LOWDEN Vice-President. 

K II. NTAUNTON, Secretary. 

EXECUTIVE COMMITTEE. 

H K BELDEN, GEO.. EASTON, H. M. GRANT. 

LIBRARY. 

W. BPENCER, E. W. CARPENTER. 

( A LIFORNIA KNAPSACK . 

GEO. F.GRANT, . . . Editor. 

DINNER COMMITTEE. 

G. W. SPENCEB, GEO. F. GRANT. 



FIRE UNDERWRITERS' ASSOCIATION 



OF THE PACIFIC. 



The Fifteenth regular Annual Meeting of the Asso- 
ciation was held in accordance with the By-Laws, and 
upon notice by the Secretary, at the Assembly Rooms, 
No. 307 Sansome Street, San Francisco, on the 17th 
and 18th of February, 1891. 

There were noted as being present during the session 
the following members: 



Lesley Bates, 
H\ K. Belden, 
G. C. Boardman, 
W. J. Callingham, 
E. W. Carpenter, 
J. W. G. Cofran, 
H. A. Craig, 
C. H. Cushing, 

B. Dercksen, 

, J. H. Dibbern, 

C. W. Dohrman, 
Geo. D. Dornin, 
Geo. W. Dornin, 
V. C. Driffield, 
W. J. Dutton, 
Geo. Easton, 

L. B. Edwards, 
E. P. Farnsworth, 
B. Faymonville, 



C. M. Kinne, 
J. G. Lavery, 
R. Lockey, 

W. H. Lowden, 
J. Marshall, Jr., 
I. Manheim, 
Louis Mel, 

D. E. Miles, 

R. H. Naunton, 

Ed. Niles, 

P. M. Nippert, 

T. E. Pope, 

J. N. Reynolds, 

Win. Sexton, 

G. W. Spencer, 

D. J. Staples, 

E. G. Sprowl, 
Geo. H. Tyson, 
R. V. Watt, 



FIFTEENTH ANNUAL MEETING OF THE 

Henry T. Fennel, L. Weinman, 

Wm. Frank, A. J. Wetzlar, 

V. M. Gilcrest, D. B. Wilson, 

A. R. Gfurrey, J. S. Wilson, 

Geo. F. Grant, U. B. Wilson, 

II. M. Grant, H. E. Wright, 

Tom C. Grant, F. W. Young, 

.1. K. Hillman, W. H. Gibbons, 

I). Hirschfeld, J. T, Fogarty, 

W. B. Hopkins, H. Folger, 

S. D. Ives, Max Bertheau, 

Julius Jacobs, G. W. Turner, 

F. Jacoby, D. Hewett, 

A. P. St. Clair, W. L. Ashe. 

Honorary Members — G. F. McLellan, W. S. Duval, 
Alfred Stillman. 

Visitors — F. G. Lermit, London, Eng.; R. A. Luke, 
Helena, Montana; C. F. Burton, E. A. Crouch, Sacra- 
mento; F. G. Argill, Capt. Burns, Seattle; Mr. Woods, 
British ^ } i ia; Mr. Rust, Ben E. Ward, Los Angeles; 
Mr. M r, Riverside; S. A. Sanderson, New York; H. 
Mohns, R. H. Warfield, C. M. Nichols, Mr. Wachen- 
beimer. 

The meeting having been called to order, the Presi- 
dent announced that the first in order on the programme 
was the Annual Report of the Secretary. 

SECEET ART'S EEPOET. 

Sax Francisco, February 17th, 1891. 
Fin Underwriters 9 Association of the Pacific: 

Mr. President and Members of the Association — Gentlemen: In 
the Annual Eeport of the Secretary there is little scope to expend your 
time in listening to remarks upon our condition, as all these matters will 
-ented to you in other papers. 
•. ve now on our roll of active full subscribing members, one hun- 
dred and forty-three. 



FIRE UNDERWRITERS ASSOCIATION. 7 

During the year the Association has lost seven members from its active 
roll, viz: 

Died 2 

Resigned 2 

Placed on honorary list 1 

Withdrawn . 2 

Total 7 

Our honorary list of members now numbers thirteen; during the year 
one has died, B. B. Lee; one transferred to the active list, A. Stillman, 
and two have been added, A. D. Smith and W. S. Duval. 

Trusting that my services have met with j T our approval during the 
year, I am, Sirs, 

Yours respectfully, 

R. H. NAUNTON, Secretary. 

On motion, report was received and placed on file. 

The President — The next will be the report of the 
Treasurer. 

TREASURER'S REPORT. 

Report of R. H. Naunton, Treasurer of the Fire UnderAvriters' Association 

of the Pacific, for the Fiscal Year ending February 17th, 1891: 
Balance on hand at last report $484 65 

RECEIPTS. 

129 Subscribers, at $5 "45 00 

4 Subscribers, at $3 1 

2 Subscribers at $2.50 5 

3 Subscribers, at $2 " 6 00 

18 Admission Fees, at $5 90 00 

1 Subscription, for 1889 . : 5 00 

1 Subscription, for 1889 2 50 

Received from sale of extra copies of Annual Proceed- 
ings 11 50 

777 00 

Total $1,261 65 

EXPENDITURES. 

Feb. 21 Paid T. W. Fenn, services as Secretary $100 00 

Feb. 22 Paid E. E. Parlin, Stenographer (1890) 40 25 

Mch. 14 Paid Klinkner, Rubber Stamp and Pad 1 50 

Mch. 14 Paid printing Circulars and 1000 envelopes. . . 5 00 

Mch. 16 Paid Henderson & Crane (programmes) 5 00 

Mch. 18 Paid balance due Dinner Committee 21 50 

Mch. 25 Paid account Library Fund for books 12 00 



FIFTEENTH ANNUAL MEETING OF THE 

M< h. 29 Paid printing Cards and notices § 3 25 

29 Paid printing large Circulars 2 50 

April «; Paid Spanlding ft Co., printing Annual Report. 150 00 

April <i Paid Spanlding A: Co., Zincographs, etc 39 50 

; ii Paid Spanlding cV- Co. 300 copies "Celebrated 

18 50 

M 12 Taid Miss Emerson, typewriting 12 50 

20 Paid Stanley ft Co., printing 3 00 

June •"><> Taid Spanlding ft Co., 600 copies Lowden's 

paper 35 00 

JnnedO Paid Purse, taking out and cleaning Library.. 1 50 

27 Paid Excelsior Printing Co., for Notices, etc.. . 10 50 

June 21 Paid Excelsior Printing Co., for Notices, etc.. . 2 25 

1\ Paid N. T. James to redeem badge No. 87 2 50 

June 90 Paid E. B. Deane & Co., Letter-heads 2 75 

i Paid Excelsior Printing Co., Circulars 2 50 

Jt» Paid Miss Emerson, Circulars 1 50 

1 7 Paid Floral-piece— Z. P. Clark 15 00 

I 7 Paid Stanley & Co., printing 31 25 

Oct. 17 Paid H. S. Crocker & Co., Mimiograph 21 50 

20 Paid Excelsior Printing Co., Notices, etc 9 00 

20 Paid amount loaned to Library Fund 46 20 

Oct. 20 Paid Miss Beckham, Typewriting 4 00 

21 Paid Miss Beckham, Typewriting 3 50 

16 Paid Excelsior Printing Co 8 25 

Paid Floral-piece— J. W. Staples 25 00 

26 Paid Crape for Funeral 7 50 

1891. 

Jan. 5 Paid T. F. Gavigan 1 75 

6 Paid printing Notices 2 50 

6 Paid Janitor Purse for services 5 00 

Paid printing Notices and proxies 3 25 

13 Paid Engrossing Resolutions— J. W. Staples. . 12 50 

1 3 Paid Miss Harbaugh (typewriting) 3 00 

Paid 1 Letter-book 1 00 

Paid Library Fund insurance 5 40 

Paid Delivering Notices and other incidental 

sea 24 50 

Paid Postage 9 00 

Paid Telegrams 1 00 

6713 10 

Balance on hand 548 55 

81.261 65 

Feb. 17, 1891. — — — — 
K. H. NAUNTON. Treasurer. 



FIRE UNDERWRITERS' ASSOCIATION. 9 

ADDENDA. 

Ill addition to the actual cash in bank, this Association has an asset in 
the shape of moneys loaned to the Library Fund, as follows: 

During the year 1888 $25 00 

During the year 1889 22 52 

During the year 1890 65 10 

$112 62 

Cash in Bank 548 55 

Net total Assets $661 17 

Examined and approved, February 16, 1891. 

HENRY K. BELDEN, 
H. M. GRANT, 
GEO. EASTON, 

Executive Committee. 

On motion, report was approved and placed on file. 

It was moved and carried that a donation be made by 
the Association to the Library fund of $112.62, the 
amount of its indebtedness. 

The next in order, gentlemen, will be the report of 
the Executive Committee. 

REPORT OF THE EXECUTIVE COMMITTEE. 

Mr. President axd Gentlemen — The books and vouchers of your 
Secretary and Treasurer have been duly audited and found, in all respects, 
correct. 

The cash on hand, $548.55, and additional amount due from the library 
fund of |112.62, make the very handsome showing of $661.17, as assets 
of the Association at this date. 

The aggregate expenses of the year have exceeded those of 1889 in the 
sum of $275.15, owing to the Association having been called upon to meet 
unusual expenditures, as shown in the Secretary's report. 

The increase of membership from 132 to 143 indicates a prosperous 
condition — a gross gain of 18 new members having been made, and a net 
gain of 11. 

There are at present some few names on the roll which, owing to mem- 
bers having retired from the business, have become ineligible. Your 
Committee would suggest that early action be taken, and that notice be 
given such members to appear and show cause why their names should 
not be dropped from the list in accordance with the provisions of the 
Constitution. 



Ill FIFTEENTH ANNUAL MEETING OF THE 

{* the proposition ol securing a separate room for the use of the Asso- 

bo be still favored by many members, your Committee would 

onsidering the increased membership and income) that attention 

liven to the Bubject. Members do not at all times feel at liberty 

til themselves of the use of the library, their entrance to the present 

1 by the meetings of the Union and its various Corn- 

mitt. 

Respectfully submitted, 

HENRY K. BELDEN, 

Chairman. 
H. M. GKANT, 
GEO. E ASTON, 

Executive Committee. 

The President — It is moved and seconded that the 
report of the Executive Committee, and the suggestions 
therein contained be acted upon at the next monthly 
meeting. So ordered. 

The next business was the reading of the President's 
Report. 

PRESIDENT'S ADDRESS. 
>■ members of the Fire Underwriters 9 Association of the Pacific. 
ffTLBMEK — I address you to-day with a feeling of pleasure and grati- 
tude, not unmixed, however, with regret. Pleasure, as the past year has 
marked an era of growth, progress and interest in our Association. Grati- 
tude, t<> the members who have made my administration a pleasure by 
their loyal support and encouragement; and regret, that our combined 
efforts and hard work in the direction of much needed changes, and in. 
the interest of desirable reforms, have not been crowned with that success 
which they, in my judgment merited. 

The year has been one of general prosperity to the underwriting in- 

s, and peace has prevailed in our ranks. 
As r< -nimended in the report of your last Executive Committee, the 
•ciation has looked into the subject of legal incorporation. An investi- 
»n of the project developed much that was objectionable in the way of 
rigid corporation laws that would have to be observed, and which would 
stantly hamper the freedom we have always enjoyed. The actual 
benefits and protection which might accrue to the Association from such 
kep were found upon consulting legal advice to be decidedly problem- 
d, and more imaginary than real. The Committee who had the mat- 
ter in charge thereupon unanimously concluded that the results would 
not compensate us for the sacrifice of privileges which would have to be 
made, and »o reported. 



FIRE UNDERWRITERS' ASSOCIATION. 11 

Most of you are no doubt familiar with the earnest attempt of the Asso- 
ciation for the remedy of what we term the "Credit Evil." While you 
may be aware of our attempt to devise means for the remedy of the 
credit evil, and of the final adoption by the Association of a definite 
plan, only few of you know of the many hours and days spent by 
the Committee in laboring to carry out the plan proposed. I will not 
burden you with the details of the work done by this Committee, as a 
complete summary of what was accomplished can be had by reference 
to the official report on file with your Secretary. 

In short, the Committee did not receive the support of a sufficient num- 
ber of offices to warrant the Association in placing the rules adopted into 
operation. 

Nor was our experience in this matter devoid of interesting lessons. It 
has taught us that men may honestly differ in opinion as to whether any 
particular custom is an evil or a benefit; it has taught us that men may 
honestly differ in opinion as to the efficacy of a plan to change a custom, 
no matter how simple; it has taught us that what to us may seem an un- 
mitigated evil may impress others as merely a sufferable inconvenienced 
it has taught us that a desire to punish the " other fellow " is often potent 
enough to defeat any reform; and it has impressed us overwhelmingly 
with the idea that to successfully inaugurate and accomplish a reform, it 
is important that you make every individual concerned feel thas he is the 
the projector of the reform, and that he is the chosen Moses destined to 
lead the benighted brethren out of the wilderness. 

In fact, the wealth of thinly disguised human nature disclosed during 
the Committee's search for co-operation would seem ludicrous had not its 
perversity caused such unsatisfactory ultimate results. 

But let us not be reconciled to our failure, for defeat is often the corner- 
stone of success. Its lessons give temper and strength for renewed en- 
deavors. Its experiences are guides on the high road to victory. 

For the information of the members I will say, that after hearing the 
report of the Committee on this subject, it was resolved to bring the mat- 
ter to the attention of the Pacific Insurance Union, coupled with the plan 
of the Association, and Messrs. Charles D. Haven, George W. Spencer 
and Charles A. Laton, were designated as a Committee for that purpose. 

And now, what is there of interest and benefit that I can say to you, 
and that may be for our mutual advantage? Has the past year clothed 
you with additional knowledge of your business ? Has it been to you 
one of progress in the field of insurance knowledge? Has the year's ex- 
perience made you wiser and stronger? 

Now, even a reference to our sister Association, the Pacific Insurance 
Union, may be out of place in this address, especially from one so young in 
experience; and this impresses itself the more as I look around and 
see the faces of those prominent in the Union who were in the insurance 



12 FIFTEENTH ANNUAL MEETING OF THE 

business Long before I knew what insurance was. But I maybe pardoned 
to it, in so far as it may have a bearing on the welfare of the mem- 

oi this Association, and what I may say must not be construed as a 
criticism of the Union, but an honest attempt to point out to my brethren 
the danger of impairing our usefulness by an over-indulgence in its lux- 
[s is not a fact that many of us are permitting the convenience of 
compact ratings to supersede our own judgment? Is it well for us younger 
members of the profession that the work of inspecting and rating should 
be taken from us and placed in the hands of one central office? By so 
doing have not many of us allowed our business to become an adjunct to 

l'n ion instead of making the Union an adjunct to our business? Have 
we not through good nature permitted the Union to do exclusively that 
work, which if done by ourselves, would give us much needed experience? 
Efae not tin existence of the Union, with its complete systems, made it 
sible to run the insurance business on this Coast automatically? And 
has not just to that extent the incentive to thought and study and a per- 
sonal knowledge of the business been removed? Is there not in this, 
we apprehension? Let me 'put you on your guard. Don't 
permit the Beductive conveniences of the Union to become a substitute 
for your own reason and judgment, and thus relegate you to a sphere of 
aselessness, by obscuring your own power of independent thought. Be- 
member that your utility as insurance men depends largely upon your 

• t individual judgment of risks and hazards, and your knowledge of 
what they are worth. Bemember that some time you may be without a 
Union, and what then will become of him who has allowed himself to 

aerate into an automaton? The reed upon which you have depended 

will be broken, and helpless and alone, the procession of progress will 

- you by. 

The Union is a great convenience as an auxiliary to our business, and 

let i;~ regard it as such. It has been and is of much service to 

But let us endeavor to learn to reason for ourselves. Nor will it be 

tisfied with a general knowledge of the problems of the 

present only, no matter how complete that knowledge maybe. Prepare 

t«. meet the exigencies and contingencies of the future. Bemember that 

•t the younger generation are training not only to fight the battles of 
the present but the wars of the future, when old Father Time shall have 
ferried the Generals of to-day over the Dark Biver into the unknown land. 
Who will be the Generals then, and who and what will be the foe? As 

lecade after another has brought its increased burdens of responsi- 
bility to those in authority and our business has grown in magnitude, 

e questions have arisen and have been met. Obstacles previously 
unknown have been interposed and have been overcome. And to those 
of you who shall be in command twenty years hence, our experiences of 
to-day may seem as child's play. 



FIRE UNDERWRITERS' ASSOCIATION. 13 

Then let us prepare for the new order of things by watching the current 
of events, and bearing in mind that a close study of details of the present 
will point out to you the events of the future. 

And right here it occurs to me that it would be of great benefit to 
Special Agents and to the underwriting interests generally, if the field 
men, who are brought in direct contact with the local agents and the in- 
suring public, could be brought into closer communication, and into more 
complete harmony and sympathy with the Union. And would it not be 
well to furnish every Special Agent with a copy of such rules as may be 
from time to time promulgated by circular from the Union office? 

All of this may strike you as being in the nature of a moral lecture 
rather than a President's Annual Address, and if I have trespassed, my 
onty excuse to you is that I feel deeply upon the subject, and that I have 
an earnest desire to see the rank and file of the insurance fraternity on 
this Coast excelled by no other similar body in existence. 

During the past year we have twice been called on to mourn the 
death of members of this Association. In each case the deceased was an 
ex-President of this body. 

The first to go w r as Z. P. Cla rk. We all knew genial, good-hearted 
" Charley " Clark, and we all remember how in August last at the sea 
shore at Santa Cruz he passed away while the waves on the beach moaned 
and the sea breeze sang a requiem over his bier. May the Unknown 
Land yield for him the harvest due a sunny soul and a generous heart. 

The next to go was large-hearted and whole-souled J. W. Staples. Who 
did not know and love " WinJ,LSl&ple*? When all the world was rejoicing 
at Christmas tide, the Angel of Death threw the sombre shadow of its 
wing over our friend, and he laid down the burden of this life and crossed 
over the Dark River never to return. He had taken his last trip — he had 
gone home for Christmas! 

And now, my friends, what more shall I say ? There are many papers 
of greater interest to follow, and I feel that it will be unkind to keep you 
waiting. 

To those who have been so considerate as to prepare these papers at my 
request, let me give my earnest thanks, and at the same time bespeak for 
my successor as President your generous and loyal support. 

I thank you for your attention. 

(Applause.) 

The President — The report of the Library Committee 
is next in order. 

Mr. Spencer — The report of the Library Comittee is a 
very brief one. I had no report to make. The library 



11 FIFTEENTH ANNUAL MEETING OF THE 

is here with you, like the poor always. We have tried 
from time to time to increase its efficiency and its value 
to you, but just at this time the funds of the Library 
Committee are wrecked, seriously wrecked, but we are 
going to gel a further contribution from our friends, 
and we hope, on the occasion of the next annual meet- 
in-, we shall have an accession to our shelves, and in- 
ised value to the library. That is all I have to re- 
port on this occasion. 

The President — The next thing in order will be " At- 
tachments or Garnishments Before Proofs are Made/' by 
Peter Wmne, of Denver. Mr. Whine has kindly fur- 
nished a paper and sent it to us. I think Mr. Kinne 
ha- it in his possession for reading. 

Denver, Col., November 5th, 1890. 
'<- M< mbera of the "Fire Underwriters' Association of the Pacific." 
Gentlemen — In pursuance of your request I have the honor to submit 
for your consideration the following paper on the subject of "Attachment 
Garnishment Before Proofs of Loss." In discussing this subject the 
first point to be considered is: 
The effect of Attachment or Garnishment. 

Bei - any farther it is necessary that we recognize two facts. 

is that the policy is a contract, and the other is, that there is no way 
under this contract, except by its terms and conditions; 
and these terms and conditions provide for only two ways of recovery, to- 
wit: by cancellation, or through loss or damage by fire. The latter clause 
condition precedent for recovery, and the policy also makes proof of 
loss a condition precedent before recovery can be had. The courts have 
ttedly held that proofs of loss are as much a condition precedent for 
<t,y. a- that the thing insured must be destroyed or damaged before 
• •ry «an be had otherwise than by cancellation, and not only that the 
mst be made, but that they must be made within the time 
titied in the policy, or the claim against the company is rendered null 
and v.. id. We thus see that in order to make valid a claim against a com- 
pany, three things have to occur. 
First— There must be a fire. 

ul— The thing insured must be damaged or destroyed. 
Third— Proofs of loss must be made. 
All of these are conditions precedent to a recovery, as before stated, and 



FIRE UNDERWRITERS' ASSOCIATION. 15 

no one more so than another. Who would claim for a moment that there 
could be a valid or legal claim against the company, save for cancellation, 
without a fire, and the property insured damaged or destroyed. 

No one would for a moment make such a claim, and it seems to the 
writer equally as unreasonable to claim that it is possible for a recovery to 
be had, or any legal obligation against the company to exist, until after 
proofs of loss have been made and served upon them. And right here I 
wish to say that most of the difficulties existing as to the garnishment of 
the head office, can almost invariably be avoided by the head office deny- 
ing any liability should service be had on them for garnishment prior to 
proofs of loss being received. But this point I will more fully discuss in 
another part of this paper. 

All of the conditions of the ordinary policy are good and valid unless 
there has been a waiver. It is equally as difficult in my mind to imagine 
how a recovery can be had without proofs of loss after a fire, as it would 
be to imagine a case where a person could recover by making proofs of 
loss before a fire. In the absence of statutory regulations there can be no 
legal liability without both things occurring. A recovery cannot be made 
under a policy where the conditions precedent to a recovery have not been 
complied with. Let us suppose, as is often the case, that a fire has oc- 
curred, but the assured fails to make a claim within the specified time. 
Would anyone contend that there was any liability on the part of the 
company? Most certainly not. Further, if the company did not see fit 
to pay the amount claimed, and suit was not commenced within the time 
provided in the policy, in the absence of any waiver, there could be no 
legal claim under the policy. 

The question to be discussed is: Whether at the time of garnishment 
the company owes the assured anything, and I claim most positively and 
emphatically, that unless proofs of loss have been made, they do not. As 
before stated, the making of proofs of loss is a condition precedent, and 
nothing is due until it is complied with. 

In order to have a successful garnishment, the parties garnisheed must 
owe something to the party from whom recovery is sought, either in the 
way of money due or to become due, or by having in their possession 
property belonging to him. It is quite plain to me that before a claimant 
makes proof of loss, the company owes him nothing. It certainly owes 
him nothing that is due or to become due. Neither can it be said to have 
in its possession any of his property, unless any unearned premium held 
by them should be classed as such. At best this would be but a small 
matter and need not be discussed here. 

Again, is it reasonable to claim that the company can be held for a gar- 
nishment before proofs of loss, made upon the basis that if the party 
from whom recovery is sought does certain things, the said garnishment 
will be valid and full of effect, while if he does not do those things it will 
be null and void. If the failure to make proofs of loss at the end shows 



16 FIFTEENTH ANNUAL MEETING OF THE 

t liit the company is Dot liable — then the company never was liable, and 
In qo€ no indebtedness was due or to become due to the assured, and con- 
sequently (he onlyanswer necessary to make to the garnishment is, "We 
do not owe the assured anything, nor have we any of his property in our 
possession." 

. ke the ground opposite to this makes the company bound for a 
time, and then released; freed by a species of "presto change" logic that 
t«. i very /7/ogical and unreasonable. If the garnishment was 

. before proofs of loss were received, how could the failure of the 
claimant to make proofs of loss invalidate the garnishment. And yet 
there is no one who will claim that the garnishment would hold in case 
pro< I were not made. You might as well try to garnishee a com- 

pany before a fire, for a fire that might occur, or on a policy that had 
r yet been issued or contracted for. As before stated, it is a point re- 
■ Uy sustained by the courts that proofs of loss are as necessary to 
very from a company, as the loss itself, and therefore I claim, and 
1 contradiction that one might as well garnishee before the 
fire, a- before the proofs. It is an undeniable fact that a company owes 
policyholder the amount of his unearned premium, and this amount 
is due and payable at any time on demand by the proper authority, and 
cancellation of the policy, but in the case of a loss, nothing is owed by, 
or due from the company, to the assured, until proofs of loss have been 
made out and served upon them through the proper channel. The posi- 
tion that a garnishment can be held good before proofs of loss, and can 
be made so as to hold the company liable if the assured makes proofs of 
and not liable if he does not, seems as ridiculous to me as the old 
of the man who aimed his gun and shot so as to miss the object if 
it was a calf, and hit it if it was a bear. 

There plainly must be an adjustment of the loss before any liability 
ean occur, and in order to make said adjustment, the following proceed- 
- must be had: 
First— To determine if there is any liability. 

»nd — The amount of said liability, if any. 
Until after the claimant makes a move there can be no adjustment, and 
hence no liability. Until after proofs of loss are made, to which the in- 
1 i- required to swear, the company has no legal knowledge that there 
a tire, or that the assured owned the property damaged or destroyed, 
or that the said property was in the place insured at the time of the fire, 
or that the claimant had done nothing to invalidate the policy. Neither 
do they know that the property was destroyed or damaged without the 
procurement of the assured. It is nothing more than just that the com- 
pany should have all this information before they should be considered 
liable for anything. In every State, so far as the writer has been able to 
we, where there is no statutory regulation to the contrary, it is inva- 



FIRE UNDERWRITERS' ASSOCIATION. 17 

riably held by the courts that garnishment before proofs of loss, is void, 
if the company denies owing the assured anything in plain and unequiv- 
ocal terms at the time of service. 

There is one way that the company might get into difficulty through 
garnishment, and that is where the agent, or adjustor is garnisheed at one 
place, and the head office at another, and to my mind it is clear that this 
difficulty can be almost invariably avoided, by proceeding as hereinafter 
set forth. A corporation can act only through its representatives, and 
the law requires that the said representative shall be an officer or agent of 
the corporation. Now if that officer or agent has no service made on him 
of proofs of loss, or does not know of any such service, can he not truth- 
fully say of his own knowledge that the company does not owe anything 
to the party from whom recovery is sought to be made. 

To illustrate the case more plainly, we will suppose, what is not very 
likely to happen, viz: that service is had on the head office, and on the 
agent or adjuster in the field, at one and the same time. This is the 
strongest possible case that could occur and the most difficult to over- 
come. Let the company answer plainly that there is no liability, and 
they will be released from garnishment, and should the adjuster or agent 
be garnisheed before proofs of loss, let him do the same thing, and he will 
be released also. We will even suppose that the adjuster has all his pa- 
pers ready, pr6ofs of loss, receipts, and drafts, and that there is danger of 
a garnishment being made at any moment. Let him have the assured 
sign the proofs of loss first, the receipts next, the draft is already exe- 
cuted; the adjuster with one hand takes his proofs of loss and receipts, 
and with the other, hands the assured his draft, and I would like to know 
how a garnishment could get in between these acts. 

As hereinbefore set forth a company has no legal knowledge of a loss, 
is not supposed to know of it, cannot be claimed to know of it, until it 
has received proofs of the same. Therefore up to the time said proofs are 
received it can deny all liability, and cannot be held by a garnishment, 
and by arranging to pay to the assured the amount due him, simulta- 
neously with the receipt from him of the proofs of loss, no interval will 
be allowed for a garnishment to be made, and thus the companies can for- 
ever escape difficulty on this point. Under this arrangement also it will 
be impossible for a company to become liable to two different parties, 
through the company being garnisheed and the adjuster giving out a 
draft, at or about the same time. Under other circumstances than as de- 
tailed above this complication is very likely to ensue. 
Respectfully submitted, 

PETER WINNE. 

The President — You have heard the article of Mr. 
Winne. There are many of you who have had consider- 



Is FIFTEENTH ANNUAL MEETING OF THE 

able experience in the matter of garnishments and ad- 
justments, and I would be very glad to hear some com- 
ments by the members. 

Mr. Wetzlar — The paper just read presents to my 
mind some incongruities; materially so as regards the 
mode oi managing as adopted in the State of California. 
Mr. Winne starts out with the premise that when a con- 
tract matures by reason of a fire, that there is nothing 
due the claimant until proofs of loss are filed. I take 
issue with such proposition, that, whilst the claim does 
not become payable, still a claim for compensation 
matures when the fire occurs, the amount ascertained at 
the time of payment, a procedure termed as usual 
by insurance companies, proofs of loss, are by no means 
definite means of determining the liability. Nothing, 

concerning insurance companies, can oust a man of 
his legal rights in any mode whatsoever. Rights of 
• very under the California statutes do not depend 
upon proofs of loss, I believe; it is my experience in 
business. So far as court procedures have gone as 
against insurance companies, proofs of loss cut but a 
very indefinite figure in the eyes of courts, whilst in a 
measure demonstrating the concentrated evidence that 
the insured collates from evidence and from the insured. 

Under the California attachments all moneys belong- 
ing to the parties sued, either then in hand, or which 
may become due or owing, or come into his hands there- 
after, may be garnisheed. I am inclined to think that 
when a fire occurs that the man has money due him 
from the insurance company. That at the date of pay- 
ment, a lateral one; that it may be extended by reason 
of inquiry; that the company has the right under its 
policy, to take sixty days for such inquiry. It is not by 
any means decided that proofs of loss must bi made in 



FIRE underwriters' association. 19 

order to find that there is money due a man, and I be- 
lieve that the courts of this State have held that a gar- 
nishment levied before proofs of loss would be valid. It 
should be considered a very dangerous position for any 
insurance company to take a different ground. The 
subject, however, is one that requires deep study. It is 
not one that can be discussed here at the moment, and 
I would like to see the Association make that a subject 
for discussion at one of their regular monthly meetings. 
I would like to look at it more closely than the paper has 
at the present time. 

Mr. Kinne — I have read the paper as you directed, 
and I desire, as far as my experience is concerned, to 
take issue with the conclusions arrived at by Mr. 
Winne. I don't believe there is any safe road to 
travel in the way of attachments or garnishments upon 
a company, or upon its local agent, upon its adjuster, 
or upon anybody that has the least semblance of a con- 
nection with the company, unless the company will 
make the answ r er that is usual to be made, — that we owe 
the gentleman nothing as far as we know, and then, be- 
fore anything is done in the w r ay of payment of a loss 
see that every single paper that emanates from the 
Sheriff's office is wiped out and abrogated through the 
the same process that put them into existence. I don't 
think there is a single company that would act upon 
the advice given by Mr. Winne, but what in the course 
of time would be very sorry for so doing. Mr. Wetzlar 
epitomized the whole subject when he said that, as soon as 
the fire occurs, a loss has accrued, and will become due 
and payable depending upon certain matters and condi- 
tions of time, showing of cost of the articles destroyed, 
and everything that pertains to the conditions of our 
policies in the w 7 ay of making up so-called proofs of loss. 



FIFTEENTH ANNUAL MEETING OF THE 

It must be understood that we don't insure a thing, we 
insure the man, the individual, against loss that may 
happen to a thing. The loss has taken place, the dam- 
has accrued. Xow the man is injured, or he is not. 
It is simply a question of time and method to properly 
find out when that loss becomes due and payable 
to him. I could not feel, after reading a paper of 
this kind, that I should be considered as upholding any 
of the ideas advanced by Mr. Winne. My advice is, not 
to make any answer that he states and ignore garnish- 
ment or attachment, but in every and all cases see that 
the garnishment is released before you pay a loss, no 
matter where it falls, where it hurts. AVe have had a 
< where an attachment has been made upon the prop- 
erty of the company in Xew York, outside the juris- 
diction of the branch of the company that I am con- 
nected with here, and yet the courts say it holds. They 
can serve papers upon our agent in Xew York and they 
hind us here. The only way is simply to get every- 
thing released, find out what the loss is, and then pay it. 

Mr. Driffield — While I have heard only the latter por- 
tion of Mr. Winne's paper, yet I am glad that I was 
able to be here during the discussion upon the subject of 
his article. I beg respectfully to take exception to the 
opinions expressed by Col. Kinne and Mr. Wetzlar, and 
to, in some degree, champion the views of the writer of 
the paper. I have, for a long time, considered that 
garnishments served upon companies, prior to the filing 
of proofs by the assured, were of no effect legally, and 
depended entirely for their object upon merely the com- 
placency of the company's acknowledging service and 
making return. Before proofs are filed with companies 
interested, there is certainly nothing due by them to 

3ured, and a return of "nothing owing" is, in my 



FIRE UNDERWRITERS' ASSOCIATION. 21 

opinion, strictly in order. I am not speaking of what 
is the best policy to be adopted in such cases, but sim- 
ply of the legal rights of the companies in the matter. 

Not long ago I had occasion to test the correctness of 
my views. I was adjusting a loss in the Northwest under 
a policy wherein loss was made payable to a chattel 
mortgagee "as his interest might appear. " Having 
completed my adjustment, I notified the assured and the 
mortgagee to be at the office of the local agents on the 
morrow to sign proofs and receive draft, but upon re- 
turning to the office I found that garnishment papers 
had been served upon the agents. Upon inquiry I 
learned that their return had been indefinite, and ac- 
cordingly notified the attorney of the garnisheeing cred- 
itors that I would forward the papers to the head office 
for what they were worth. Feeling confident later on 
that the loss was a dishonest one, I sought out the as- 
sured, and showing him that there was practically noth- 
ing coming to him after claims had been met, I secured 
his release and discharge for a trifling sum, and subse- 
quently settled w T ith the mortgagee, taking a discharge 
for the amount of his interest. I had thus secured a clean 
release under the policy, and was enabled to materially 
reduce a loss, the honesty of which I more than doubted. 
Having informed the attorney of the garnisheeing cred- 
itors of what I had done, he expressed great indignation 
and threatened proceedings for contempt, but eventually, 
after some study of authorities, and a short period of 
meditation, acknowledged that I " had him in the door." 

In upholding some of the views of Mr. Winne I do 
not w r ish to be understood as taking the stand that com- 
panies should invariably ignore the existence of garnish- 
ments filed prior to the receipt of proofs. Circumstances 
must govern the policy to be adopted in various cases, 
2 



FIFTEENTH ANNUAL MEETING OF THE 

but 1 do argue that garnishments so levied are not worth 
the paper they are written on unless the companies 
themselves wish them to be so. 

The President — I am rather sorry that Mr. Winne is 
not here to answer the comments made by the gentlemen, 
and defend his paper, so to speak. I am also sorry that 
Mr. Winne, while he has expressed opinions in his paper, 
did not see lit to back them up by some decisions. Be- 
cause we all know how we can theorize and advance 
our own opinions, and we all know how the courts sweep 
them away as though they were cobwebs. As the paper 
was read by Col. Kinne, I digested it about as follows: 
That the insurance policy is a contract as a whole, and 
that all the terms of the policy must be complied with 
before anything becomes due under it. If I were to 
make a contract with Mr. Kinne, for instance, to pay him 
ten dollars for walking between now and to-morrow 
morning, first down to the wharf, down to the ferry, next 
down to the mail dock and next up to Fillmore Street, and 
he should come around to-morrow morning and say he 
wanted his ten dollars, aiid he would say, Well, I have 
walked to the ferry, and walked to the mail dock, but I 
did not walk out to Fillmore Street, I would take that as 
evidence that the money was not due him, because he 
had not earned it, and there could be no recovery. 
And I think I see the point that Mr. Winne makes. 
There are three things to be done before anything be- 
eomes due. Three conditions precedent under that con- 
tract. One is the fire, the next is the damage, and the 
next is the filing of the proofs of loss. There are three 
conditions, and I am not prepared to either sustain his 
views or to combat them, but would repeat what I said 
before, that I am very sorry that Mr. Winne is not here 



FIRE UNDERWRITERS' ASSOCIATION. 23 

to defend his own paper, and present us with his own 
views. 

Mr. Easton — Allow me just one moment. I think the 
discussion is still open. I think Mr. Winne lost sight 
of the fact that executions are what money is collected 
on, not garnishments; and that is really the trouble. I 
think a garnishment can be levied at any time. Before 
an execution can be levied the claim must have become 
due and payable, or else there is nothing for the execu- 
tion to take hold of. A garnishment can be issued at 
any time, of that there is no question. 

Mr. Reynolds — I am heartily in accord with Col. 
Kinne and Mr.Wetzlar in their remarks. I believe in the 
doctrine that they lay down. I have had some little ex- 
perience in adjustments, but I would like to inquire of 
them w T bat defense a company would have in the case that 
Mr. Whine puts there, where an adjuster on the ground 
gives a draft, for instance, to some gentleman who has 
credit at the bank, and they would immediately place it 
to his credit, and he would draw the money, and, at the 
same time that the draft was handed over to the assured, 
the company would be garnisheed in San Francisco. 
Now, as I understand a garnishment, it calls upon the 
company to answer the question whether they owe this 
man anything, or whether anything is to become due 
from the company to the individual. I just make this 
suggestion, that I would like to hear the way out of pass- 
ing this draft, and the company being garnisheed in San 
Francisco at the same time. 

Mr. Wetzler — Mr. Reynolds having made the inquiry, 
I rise to answer it. The same proposition occurred to 
us during the time of the occurrence of the Seattle fire. 
I at that time suggested to the meeting of adjusters that 



24 FIFTEENTH ANNUAL MEETING OF THE 

we adopt the stamp, or endorsement upon their drafts 
which were drawn there payable down here at the office-, 
endorsed as follows: Subject to liens, garnishments or 
attachments filed. I think that would obviate the diffi- 
culty. There is no doubt that a draft endorsed in that 
manner and passed by the receiver of the draft into the 
hank, simply becomes a collection. 

Mr. Reynolds — Still that does not answer my question. 
1 am speaking of a draft with any limit of payment 
waived. Just simply a draft; a man collects his money. 
< >f course if you put a draft in the bank ten days after 
Bight, that is another thing. The bank wherein the 
draft is deposited wont pay the cash. Of course you can 
make a draft so as to stop payment on it even. 

Mr. Kinne — I think he might have a draft that is cor- 
it of itself. And that is the only proper way to make a 
draft and to keep yourself out of trouble. But I think the 
proper thing would be in case a draft came to your hands, 
having passed through the so-called third or innocent 
party, or half a dozen innocent parties, that when that 
draft comes drawn upon you, simply refuse payment if you 
have been garnisheed; that is the only way to do, if you 
would avoid trouble, and let them know that the money 
was ready when the garnishment would be released. A 
draft coming to you is because a loss has occurred, and 
before finding out what it is you have been garnisheed 
for a certain amount. You cannot pay it because it is 
that amount of money. If they have realized on the 
draft, it is simply a piece of paper then, of course: the 
party that received it had very little discretion, perhaps 
more confidence and less discretion than he ought to 
have had, and has got to bear the burden. The only 
fe way is not to pay a dollar after you have had gar- 



FIRE UNDERWRITERS' ASSOCIATION. 25 

nishment served upon you. That is law, and that ifl 
business. 

Mr. Lowden — I think the rule would be a safe one for 
the company to adopt. The adjuster gives a draft to the 
assured; the assured takes it to the bank, the bank ad- 
vances the money; it passes through the hands of several 
innocent parties' before it reaches the San Francisco 
office. The general agent in San Francisco refuses pay- 
ment of that draft. You now have other claimants upon 
your hands. The innocent parties have suffered. They 
have advanced this money to the assured. To my mind 
the easiest way out of it would be, that when garnish- 
ment papers are served upon the general agent in San 
Francisco, for the general agent to at once advise the 
adjuster that the papers have been served. If the draft 
has passed from the adjuster's hands previous to the re- 
ceipt by him of that advice, I think that the law 
could not hold the company for it. The law does not 
require impossibilities from anyone. If the general 
agent has used all the means in his power to get that 
information to the adjuster, to stop the payment of that 
loss, he has done his whole duty in the premises. Just 
the same as when papers are filed in the private office, 
and the manager should come outside and tell his clerk 
to see that the money did not go out of his office. He 
used all the means in his power to stop the payment. 
Consequently I think that the law would not hold a com- 
pany if the general agent has done his best to advise his 
adjuster that the papers have been served upon the office 
in San Francisco. 

Mr. Reynolds — I am satisfied with the explanation; it 
covers the case exactly. 

Mr. Lockev— Mr. President, it occurs to me from the 



26 FIFTEENTH ANNUAL MEETING OF THE 

discussion here that the safest plan would "be for the 
proofs to be sent to the office, and for the office to then send 
draft to the agent. It would then be perfectly safe. If 
are garnisheed here after you have sent your draft 
to an agent you can claim you have paid it, but if the 
agi nt is garnisheed before he delivers draft he will of course 
hold it. From what little I heard of Mr. Whine's paper 
convinced me that since he has gone into the real estate 
business he is taking chances, and advises insurance 
men to do the same thing. (Laughter). I have had a 
little experience of this in our business, and I tell you 
when any papers are served upon you, you want to stop 
right there, and keep the money in your pocket until 
they are released, or you get into trouble, and it looks to 
me that Mr. Winne is advising insurance men to take 
chances that they ought not to take. I remember a case 
in Montana where a loss occurred; before the final ad- 
justment the company was garnisheed in Chicago, and 
I know that we did not pay out any money until we re- 
ceived an indemnity bond. I have had some little 
experience in adjusting, and very much prefer sending 
the proofs in, and having the draft come from the home 
office. I think that would be on the safe side all the 
time. 

Mr. Edwards — Mr. President: Is it not a fact that a 
uishment, so far as any liability of the company to 
the assured is concerned, does substitute the court itself 
for the claimant? It looks so to me. That the garnish- 
ment substitutes the court itself for the claimant in the 
of any money that might become due, and that the 
company would be answerable to it unless released in 
that way. 

Mr. Reynolds — I don't want to take up the time of the 



FIRE UNDERWRITERS' ASSOCIATION. 27 

Association, but there is another question presented by 
Mr. Whine's paper, and that is the denial of liability to 
the parties garnisheeing a company before proof of loss. 
I don't know how that would affect the company in this 
State, but I know that in three different States on the 
coast, denial of liability to any party has been decided 
by States courts to be a denial of liability to the assured, 
and you w r ould be treading on dangerous ground, doing 
that. 

Mr. Watt — I have always made it a rule when papers 
were served on me, simply to return no answer. Then 
there is nothing waived on that part of it. 

Mr. Kiniie — They are served all the same. 

Mr. Watt — Yes; that is right. I never pay until they 
are released. 

The President — Well, gentlemen, the subject presents 
to my mind another question. It is in the same line of 
thought, and I would like to submit it to the members 
and get an idea from them as to what they would do 
under the circumstances. I remember a case of a loss in 
Colorado where we were garnisheed in the local courts. 
We were also garnisheed in Chicago, and neither party 
would give an indemnify bond, and both proceeded to 
bring suit against the Firemans Fund. We would like 
to have suggestions as to what should be done under 
those circumstances. 

Mr. Wetzlar — It is a case between you, me and the 
other fellow. I would pay the money into the Colorado 
court — that saves you interest and costs, and let them 
fight it out. 

The President — I might say that a similar case oc- 
curred up in Wisconsin, and it was not held as a good 



28 FIFTEENTH ANNUAL MEETING OF THE 

defense. Paying money into one court was good in no 
other court. But this was a contract payable, issued in 
Colorado; signed in Colorado. 

Mr. Wetzlar — It is payable there, isn't it? 

The President — But the Chicago court claimed juris- 
diction over that loss. 

Mr. Wetzlar — Of course they claimed it. 

The President — If they took judgment, of course we 
would have to pay it. 

Mr. Kinne — I don't think they could get judgment. 
We had a case similar to that where we paid the money 
into court. We had no trouble, no expense; paid the 
money as we ought to have done when the time arrived, 
and it was all settled amicably. We had no worry. I 
think there is but one proper way to act in a case of this 
kind, that is, just let the other fellows have the trouble, 
worry themselves as much as they can, and you hold the 
safe 

Mr. Easton — We had a case similar to that in the San 
Joaquin Valley, and the attorneys got all there was be- 
fore they got through with it. While these suggestions 
are all good, there is one case in which an attachment 
led in Chicago was held not to be a legal defense in 
Wisconsin, and I think you will find a decision to that 
effect of record there now. 

The President— Well, gentlemen, if there are no fur- 
ther comments on Mr. Whine's paper, we will proceed 
with the paper of Mr. Ben. J. Smith: " Personal Friend- 
ship among Insurance Men." 



FIRE UNDERWRITERS' ASSOCIATION. 29 

PERSONAL FRIENDSHIP AMONG INSURANCE MEN. 

It long since occurred to me, that very few insurance men find their 
warmest personal friends among their business associates, and a some- 
what extended inquiry has served to confirm the correctness of my im- 
pression. To be sure I have found several exceptions, but no more than 
sufficient to prove the rule. Now in a business like ours, where we are, 
to so great an extent dependent upon the good faith and the co-operation 
of our associates, for the maintenence of correct practices, it seems as 
though w r e should be bound to one another, by other ties than an 
identity of interests. 

Taking for example the present compact agreement. How much more 
stability would it possess, if each of the members comprised in it felt it to 
be a scheme not only for the furtherance of his own particular interests, 
but that of his warmest and dearest friends, also. 

We know only one side, and that the worst of our confreres. 

There is a great deal more kindness in them than we ever see, and some 
means should be devised of bringing it out. 

Not long since I had occasion to call one evening upon a man pretty 
well known in this community as a shrewd, cold, calculating man. One 
possessed of a caustic tongue and an inclination to drive a sharp bargain. 
What was my surprise upon being shown into his library to find this dig- 
nified man of business going across the carpet on his hands and knees, 
his three-year-old daughter astride the small of his back, while his six- 
year-old son drove him by the coat-tails, and vigorously plied a rattan 
walking stick upon the most convenient portion of his anatomy. Of 
course I laughed, so did the sharp business man and his wife and child- 
ren, and when we finally sat down to discuss the rather unpleasant busi- 
ness upon w r hich I had called, I was agreeably surprised to find how soon 
and how satisfactorily we had it arranged. 

It may be contended that the sharp competitions and conflicts of our 
business, would be fatal to friendship, but this is not necessarily so, and no 
honorable competition should affect a genuine friendship. 'True friend- 
ship is of stern staff and will successfully stand many a hard knock. 

The friendship that has to be handled daintily is not worthy of the 
name. A friend is a person before whom we may be perfectly sincere, 
before whom we may think aloud, and in whose company all dissimula- 
tions should be put off. 

Now I ask you all to give this matter more than a passing thought. 
Devise some measure to bring out the best side of our natures. 1 believe 
the most of us are pretty good fellows if we could only find each other out. 

B. J. SMITH. 

Adjourned until 2 o'clock. 



30 FIFTEENTH ANNUAL MEETING OF THE 

AFTEENOON SESSION. 

The President — Gentlemen, you will please come to 
order. Before we proceed with the business of the 
meeting I want to read a communication that I have 
just received from our old friend Chalmers. He says: 

Sax Francisco, February 17th, 1891. 
My Deab Paymonville — The almost helpless condition of my younger 
Bon, James, arising from the serious accident he lately met with, renders 
it impossible for me to have the pleasure I had anticipared, of attending 
out annual meeting and dinner. I sincerely trust that both may prove a 
marked success. With best wishes I am, 
Sincerely yours, 

WM. L. CHALMERS. 
1>. Faymoxville, Esq., President F. U. A. of the Pacific. 

I will explain that Mr. Chalmers' youngest son had 
an accident near the ferry. He was struck with a der- 
rick. 

It was a very sad affair, and but for that Mr. Chal- 
mers would be with us. He has always been an enthu- 
siastic supporter of this Association , he has always at- 
tended our meetings, and taken part in the discussions 
and everything going on. 

President — Upon hearing that Mr. Sanderson of New 
York was with us I invited him to speak to us. Mr. 
Sanderson is connected with an automatic sprinkler 
company, and is thoroughly posted in the matter. It 
gave me much pleasure for me to invite him to address 
this meeting, which he has consented to do. He ex- 
plains that on account of the short notice he is unable 
to prepare a paper on the subject, as it is rather a 
lengthy subject to handle, but he will be glad to have 
you ask any questions that may occur to you as he goes 
along. In the meantime, he will give us a little talk 
on the subject. I want to introduce to you, gentlemen, 
Mr. Sanderson. 



FIRE UNDERWRITERS' ASSOCIATION. 31 

Mr. Sanderson — As I may not have another oppor- 
tunity publicly, of thanking you as Underwriters, for 
the very kind reception I have received here, I want to 
do it now. It is a great pleasure to meet you and I 
would have been very glad, had it been possible, in re- 
sponse to your kind invitation to have prepared a paper 
on this subject, for it is one that is of vital interest to 
every Underwriter. 

I am here as a sprinkler man, and my time is very 
limited. It is my business as well as my pleasure to 
talk of sprinkler protection, and, as your President inti- 
mates, — that I am a practical sprinkler man, I w T ill 
very gladly answer any questions that may suggest 
themselves to you from what I say, or from observations 
that you have made in the few sprinkler equipments 
that have been put in on the Coast. 

My home is in New Haven, Ct., the birth-place of the 
modern automatic sprinkler. It is in the residence of 
Henry Parmelee who invented the first practical sprink- 
ler, about 1876, and shortly after put it on the market; 
and also of John W. Bishop, who was the inventor of 
various sprinklers of the earlier type. Of course I take 
it for granted that you all know what automatic sprink- 
lers are. Distributors of water sealed with a solder that 
fuses at a low temperature, averaging about 165 degrees, 
which is some 400 degrees less than the point at which 
dry pine will ignite. 

They are attached at intervals of ten feet to a system 
of pipes extending through a building, so that every 
hundred square feet of ceiling surface is protected by 
one of these sprinklers, which under a minimum water 
pressure of five pounds, is calculated to cover absolutely 
that surface. Anyone who has had experience with fire 
knows that at the start a bucket of water is about the 



32 FIFTEENTH AXXUAL MEETING OF THE 

most effective weapon that can be used. It is not the 
amount of water that is required at the start of a fire, 
but tlic promptness with which it is applied, and it is 
on that principle that automatic sprinklers have been 
constructed. They are perpetual pails of water covering 
the entire building at regular intervals, and prepared to 
throw themselves, by the action of the fire itself, on the 
lire where it occurs; not losing their heads as does a 
wa teli man oftentimes. 

1 would say, in this connection, that I have in my 
mind four fires in the picker room of one mill, and in 
each ease it would have been impossible with any ap- 
paratus that was not automatic, for the watchman to 
have put it out. The fire being of such a nature that it 
drove him for his life to the door, and he escaped then 
only after a severe singeing; and yet in each of those 

jes which your experience would teach you would be 
serious if not checked at once, the fire was put out by 
automatic sprinklers without sufficient damage for 
the insurance companies to be called on to make good 
any loss. A fire of that nature has no substance when 
it originates, the atmosphere is, as you know, filled with 
highly inflammable dust; a fire starting goes through a 
room like a flash. It is ready to take hold, and the few 
seconds before it has got its actual grip are vital to the 
mill. The statistics of the Eastern Mill Mutuals, I 
think illustrate better than any other this point; the 
figures having been made some years after their first ad- 
vocacy of automatic sprinklers. It so happened that I 
was in Boston just at the time that they had finished 
this estimate; and Mr. Woodbury showed me the figures 
before they had been officially uttered. They impressed 
themselves on my mind at that time. I did not copy 
the figures, but I have them, as I say, very vividly in 



FIRE UNDERWRITERS' ASSOCIATION. 33 

my mind. In round numbers they had had, during 
those years, a thousand fires. Of those six hundred had 
been in risks that were not protected with automatic 
sprinklers and four hundred in risks protected. Of the 
six hundred fires in which there were no sprinklers, the 
average loss as adjusted was almost §700 per fire. Only 
about three per cent, of the number having a loss so 
small that the companies were notified, and had nothing 
to pay. In the four hundred establishments equipped 
with automatic sprinklers, the average loss per fire was 
less than $300, and in more than fifty per cent, of them 
was the loss so small that the companies were called on 
for nothing. 

The other day in looking over a file of the Spectator, 
I came across an editorial which I tore out, and from 
which, with your permission, I will read a few extracts, 
it in some measure voices what I would say, saying it 
much better than I could. (Reading from the Spec- 
tator): 

" While fire underwriters concede that the automatic sprinkler system is 
valuable in the matter of preventing incipient fires from becoming great 
ones, there has been some question raised of late as to their efficiency on 
all occasions, and the amount of rebate that should be allowed for sprin- 
kled risks. Competition among manufacturers of automatic sprinklers has 
introduced an element of hazard that the underwriters have been made to 
suffer from, namely, cheap installation, because of low prices for the work 
required in erecting the sprinkler plants. This competition has led to 
much cheap and imperfect work, and entire systems have been rendered 
useless by some little defect in construction. Anything, no matter how 
small, that prevents a supply of water from reaching the sprinkler heads 
at the critical moment of their opening, destroys the effectiveness of 
the entire plant. It is, therefore, of the first moment that every detail in 
the installation of a sprinkler plant should be carefully looked after by ex- 
perts, and not trusted to ordinary workmen, who are unfamiliar with the 
requirements of the sprinklers." 

This is very true in a large measure. As you are all 
aware, gentlemen, in the East there is no hesitation 



34 FIFTEENTH ANNUAL MEETING OF THE 

among insurance companies, there has been some ques- 
tion perhaps, among individual underwriters, but there 
Is no question, as a rule, of plants protected by auto- 
matic sprinklers being accepted by the insurance com- 
panies at a rate at least fifty per cent, below the rate cur- 
rent before equipment. There is also no question in my 
mind that in many cases such a reduction is entirely 
uncalled for; is absolutely absurd and without any rea- 
son. Automatic sprinklers to do their work properly, 
have to be thoroughly installed, and there has been too 
much disposition on the part of underwriters to say: 
u Well, it is all right; if automatic sprinklers are in that 
building, we can write on it." Now automatic sprink- 
ler- are all very well; they are excellent; but unless they 
are properly installed with adequate water supply, unless 
they are operative under all circumstances, they are 
worse than useless, because they are holding out a false 
hope of protection. They are expected to do something 
that, in the nature of things, they cannot do. And 
therefore it is true that it is absoluely essential that they 
shall be installed by one who is an expert in that busi- 
I have been asked several times since I came 
here: "Why can't our machinists or steamfitters do the 
work just as well, if you furnish us plans?" It is sim- 
ply because that man may be a good steamfitter and may 
understand steam and its uses, but he does not under- 
stand the use and the limitation of the sprinklers. It is 
as absolutely necessary to know what the sprinkler will 
not do as to know what it will, and to know the condi- 
tion under which it will do its best work. Now, we have 
had, in the East where sprinkler systems are well known, 
much trouble with concerns who have been ready to 
make estimates for sprinkler plants, having no care after 
they were installed as to what they did, and who have 



FIRE UNDERWRITERS' ASSOCIATION. 35 

imbued the mind of the property-holder, the man with 
whom you have to do, with the idea that if he had auto- 
matic sprinklers tacked along his ceiling, he was enti- 
tled to an insurance reduction. Such concerns, such 
sprinkler salesmen, are the worst enemies of the insur- 
ance interests, and I have failed yet to understand why 
the various Boards of Fire Underwriters who have this 
matter in charge, or their inspection departments, have 
not been ready to stamp out this evil. I desire to com- 
mend the attention given to this point of protection of 
insurance interests by the Board in Philadelphia, while 
Mr. Francis W. Whiting was the Superintendent. He 
allowed no sprinkler company to put up an equipment 
unless they had a representative and an office in Phil- 
adelphia to look after their work after it was installed. 
In other words, that every installation that was made 
had the full reputation of the company installing it, 
back of it. 

I will read another extract: 

In some instances, while valuable property has been fully and ade- 
quately protected by sprinklers, some adjacent exposure has been entirely 
neglected or thought unworthy of notice, and from this fire has been con- 
veyed to the sprinkled risk and involved it in destruction. The most 
recent case is that of the destruction of the mill and elevator at Winona, 
Minn. Here the mill and the elevator were thoroughly equipped with 
sprinklers, while the boiler-room, to which the system extended in a lim- 
ited manner, was deficient in certain other safeguards that rendered the 
entire risk a hazardous one. We are informed that the ceiling of the 
boiler-room was in a dangerous condition. This was covered with sheet- 
iron, between which and the ceiling proper there was an air space. It is 
now understood that the fire broke out in the boiler-room; that the 
sprinklers opened and, to all appearances, extinguished the fire. The 
watchman thereupon shut off the water, but shortly afterward the fire, 
which was concealed in the ceiling, again broke forth, and before the 
sprinklers could be restored to activity it had reached the mill and the 
elevator, and the entire property was destroyed. A disaster of this kind 
is no reflection upon the sprinkler system, but it is a most decided reflec- 
tion upon the inspectors of the insurance companies involved in the risk. 
Defects that were so apparent should have been observed by any intelli- 



FIFTEENTH ANNUAL MEETING OF THE 

inspector and the proprietors required to apply the remedy. Never- 
theless, theory goes forth that this was a sprinkled risk destroyed in spite 
oi the sprinklers, and a prejudice is thereby created against the automatic 
By 8 tern. 

I never saw the risk myself, but I was very careful to 
Irani of its construction, and of the factors that com- 
bined to allow such a result. It is not entirely stated 
here. It was a mill and elevator of old construction, 
iron-clad, with an air space, part of which, especially 
that adjacent to the engine room, had at one time been 
used as a dust conveyor. This air space had never 
been cut off in the changes made, as it could very 
readily have been on each floor; and I want right here 
to say that sprinklers should never have been put in the 
mill without providing for the protecting of this air 
Bpace. There was a good boiler-room, but the ceiling 
joists in that boiler-room ran through the iron-clad 
sheathing into the air space; by reason of heat they had 
shrunk away so that there was a little crevice. 

The lire took place in the engine room, and the sprink- 
lers apparently put it out. Then the gate valve was 
turned off to stop the flow of water, but sparks had gone in 
through that small space where the joist had shrunk 
away, and where they ran into the old dust conveyors — 
full of dust still; and about the time water was turned 
off below fire broke out on several floors of the mill The 
water supply was inadequate, and the mill went to the 
and of course. 

There are two or three things that we should learn 
from this. In the first place, in such construction, 
sprinklers should be provided at the top of the air space 
a- they would at the top of any elevator, grain chute, or 
any other draught-conveying fixtures in a mill. In the 
second place, in a system of automatic sprinklers, valves 
should always be so arranged that if the fire occurs in 



FIRE UNDERWRITERS' ASSOCIATION. 37 

one room, and it is necessary to close the valve to repair 
the system in that room, all the rest of the building 
should remain under protection; that valve should not 
be in the main pipe. 

Another illustration of the lessons that sprinkler and 
insurance men have had to learn in the erection of au- 
tomatic sprinkler equipments, was furnished in a large 
jute mill in my native city, Brooklyn, N. Y. The Planet 
Mill was a splendid brick building, equipped through- 
out, except in the basement, with an approved system of 
automatic sprinklers. It was equipped a number of 
years ago under the supervision of the Eastern Mill Mu- 
tuals, who insured it. As the greatest hazards were 
above the basement floor, they left that for the city fire 
department to take care of. Some months since a fire 
started in that basement, and before water could be got 
on the building it was in a blaze; and although the 
sprinklers on the other floors all opened, they were ut- 
terly of no avail, because the fire had got such headway 
that if the East River had been turned on it the mill 
would have been burned. And yet it was one of those 
risks which, thoroughly equipped, would have beyond a 
shadow of a doubt been saved by the sprinklers in the 
floor where the fire started. 

Now, I only want to say one word more. Just- before 
I got up here one of these gentlemen suggested that in 
certain risks he was afraid that the height of the ceilings 
and the fact that the sides were unclosed, the fire would 
get too much of a start for sprinklers to be of service. I 
only want to say as a matter of fact, we have had a great 
many fires in constructions of that kind, and that the 
average time that it takes a sprinkler to operate in such 
case is thirty seconds from the time a fire starts on the 
floor. To convince some underwriters who have not 
3 



38 FIFTEENTH ANNUAL MEETING OF THE 

seen anything of that kind, it was demonstrated to them, 
a few weeks ago, at Atlanta, Ga., that under just such 
construction sprinklers would work every time. 

I have made in J. W. Bishop's old test house at Xew 
Haven, hundreds of fire tests to meet all possible condi- 
tions, many times placing the flame in the hands of those 
who desire to make the test. And I have not yet seen a 
thorough system of automatic sprinklers fail to do its 
work either in test or actual fire. 

Mr. Stillman — Mr. Sanderson, do you inspect your 
own plants? 

Mr. Sanderson — In New York we are required by the 
Board of Underwriters to make monthly inspections of 
all the plants that we have installed, and I think it is 
one of the greatest mistakes that can possibly be made 
by any Board of Underwriters. AVhen an equipment is 
once sold to a customer, passing out of the hands of the 
Sprinkler company (the manufacturer) and is insured 
by the insurance companies, it should be directly under 
their surveillance. 

Mr. Stillman — How often would they be inspected in, 
we will say, flour mills for instance? 

Mr. Sanderson — I would say that from the insurance 
standpoint, a good and thorough inspection of the average 
risk, three or four times a year is sufficient. I would 
have it inspected as often as that, and if possible, would 
require the assured to make a monthly report. We have 
a printed form, for instance, on which we make inspec- 
tions, and we seldom have any difficulty in interesting 
the assured enough to get such reports filled out regularly 
by the engineer, or whoever is in charge of those plants. 

Mr. Stillman — There has been a good deal of question 
here as to their efficiency in sugar refineries. 



FIRE UNDERWRITERS' ASSOCIATION. 39 

Mr. Sanderson — There has been some question in 
these cases East, but it has been a question of detail 
principally. Contracts would already have been given 
out on some of the largest refineries and would have 
been completed by this time had it not been for the trust 
litigation this fall. 

The President — It has been stated at various times 
that sprinkler heads will clog or corrode, and in that 
way prevent the water escaping when the fire occurs. 
Are there any particular lines, or characteristic hazards 
that are more apt to operate in this way, than in any 
other case? 

Mr. Sanderson — In Eastern paper mills there is a large 
amount of acid used, and it has been very fatal to some 
heads. I have seen sprinkler heads all eaten up. That 
however can be overcome. In celluloid works, is used 
an acid that will eat up ordinary sprinklerheads about as 
fast as you can put them in. We commenced putting 
our sprinklers in celluloid works in Newark, N. J., and 
in all rooms where acid was used we applied a coating of 
parafine cut w T ith fusil oil, and found by renewing that, 
w r hen it had crystallized ready to peel off, we could keep 
them perfectly. Sprinklers that have been in this place 
for three years, have been tested and found perfectly 
operative. In a place where a great deal of fine dust is 
liable to collect, as in a flour mill, it is very essential 
that the sprinkler should be so constructed that it can be 
readily taken apart, cleaned and put together again. 

Mr. Faymonville — How often should that be done?. 

Mr. Sanderson — As often as inspection shows that it 
is necessary. 

Mr. Stillman — Can inspection of it be made without 
taking them apart? 



40 FIFTEENTH ANNUAL MEETING OF THE 

Mr. Sanderson — Yes, sir; very readily. You have only 
to find whether that dust is hard or not. It is the hard- 
ening of the flour dust on the sprinkler that will clog it. 
Dust settling there, absorbing moisture, becomes hard. 

The President — Then the inspection in flour mills you 

think would be sufficient three or four times a year? 

«/ 

Mr. Sanderson — Yes, sir; especially in connection with 
their own regular reports. 

The President — Now we have on this coast what is 
called a sulphide pulp mill, and do you suppose that 
the application of parafine and fusil oil that you spoke of 
would answer in that case? 

Mr. Sanderson — I have no question of it, sir. Or you 
could change the composition of the sprinkler head to 
alluminum bronze, or silicon bronze, a percentage of 
three to five per cent, of silicon in the metal will make 
it non-corosive, and, if necessary, sprinkler head can be 
made of pure aluminum, which is absolutely unassail- 
able by acids. 

The President — On this coast we have a great many 
old style mills, with concealed air space in walls and 
ceilings. Is there any way in which a sprinkler could 
be made to protect those, what you might call flues, that 
is, a flue under the floor? Is there any way of making 
a sprinkler protect that part? 

Mr. Sanderson — The simplest way and cheapest way 
is to cut off the air space at each floor. 

Mr. AVetzlar — Put a damper in the flue. 

Mr. Sanderson — Put a damper in the flue, yes sir. It 
is the easiest way and of course we find this way cheap- 
est. We can run a sprinkler through, but it is better to 



FIRE UNDERWRITERS' ASSOCIATION. 41 

have the property owner cut off the flue. It is the best 
thing for him, and the best thing for the insurance com- 
pany. If he can by any possibility be induced to tear 
down a sheathing, he should always do it; have open 
ceilings. 

The President — Well, now, at what height above the 
floor will sprinklers do their best work? 

Mr. Sanderson — That is very hard to say. I can only 
say that the best position for the sprinklers for protection 
is at the ceiling. I mean by that, it would not do in a 
peaked roof to run the lines of pipe on the timbers on a 
level with the eaves', because the heat will follow ceiling 
to the peak. 

The President — Suppose the highest point under the 
roof is, say, twenty-five feet, now if you put a sprinkler 
up there would that be of any great service in putting 
out a fire down on the floor? 

Mr. Sanderson — It has been, sir, in hundreds of cases; 
of course it is natural that a sprinkler would do its ablest 
and quickest work in a closed room where it is not ex- 
posed to draughts, that is, in a room like this. Being 
piped with sprinklers, if a fire should start at this point 
it would inevitably open the head, and put out the fire 
with probably only one head open. If the window and 
door we-re opened, making a draft, it might open other 
sprinklers, but it would open them just the same. 

Mr. Stillman — Can you explain the necessity for the 
secondary supply? 

Mr. Sanderson — Yes, sir. It is so that under all cir- 
cumstances there may be a supply. With city main 
connection for primary supply and a tank as secondary, 
the building would be protected, even though for some 



42 FIFTEENTH ANNUAL MEETING OF THE 

reason the street pressure was turned off when the fire 
broke out. 

Mr. Stillman — Can you give us an idea how much it 
would cost per head to put in sprinklers? 

Mr. Sanderson — In my experience I have never yet 
found two buildings that cost just the same per head to 
equip, because I have never yet seen two factories or 
mill buildings that were exactly the same. On an aver- 
age in New York it would cost to properly protect a 
building by the wet pipe system from S3. 75 to 84 per 
sprinkler, and, from my observation of the cost here — 
you having no pipe mills on the Coast — say 84.75 to 85 
per sprinkler. 

Mr. Stillman — These sprinklers should be placed about 
ten feet apart. 

Mr. Sanderson — Not more than ten feet, but so placed 
as to protect every square foot in the building, and there 
is where the knowledge and training comes in. 

The President — Is there any gentleman here that 
would like to ask any questions concerning this subject? 

Mr. Kinne — I would like to ask one question. Long 
ago I heard him use the words factory and mercantile 
risks? Are these sprinklers placed in the ordinary 
mercantile risk? 

Mr. Sanderson — Yes, sir. 

Mr. Kinne — Where a little heat would perhaps do but 
small damage, and a little water would do a great deal? 

Mr. Sanderson — Yes, sir. H. B. Claflin & Co.'s es- 
tablishment is equipped with them. R. H. Macy & Co.'s 
establishment is equipped with them, but what is more 
than that, if vou can make them safe in a silk mill, 



FIRE UNDERWRITERS' ASSOCIATION. 43 

where a single drop of water will spoil a piece of goods 
for their purpose, you can make them safe in any mer- 
cantile risk. A silk mill that took about fifteen hundred 
sprinklers, we equipped without the loss of a dollar to 
them, or to ourselves in equipping it, and it has pro- 
tected them since. 

Mr. Stillman — After the fire opens the head do you 
rely upon an alarm being given by the water as it moves 
through the pipes? 

Mr. Sanderson — Certainly, sir; we attach an alarm 
that rings both inside and outside of the building. In 
case the watchman is there he w T ill immediately see 
where the fire is, and when put out will turn off the 
water. This matter is of the. greatest value, and the 
greatest saving to insurance interests, by reason of the 
minimum of water damage. We have not in New York 
a fire engine which throws less than two hundred gallons, 
and carried into a building you can easily imagine the 
effect of several engines pouring two hundred gallons a 
minute from each hose nozzle. Our sprinklers dis- 
tribute ten gallons a minute and put it right where the 
fire is. That is the difference. 

Mr. Sprowl — At what temperature will the heads open? 

Mr. Sanderson — We can make them at any temper- 
ature; the ordinary temperature which they are set for 
is 165 degrees, but we regulate that to the average tem- 
perature of the room. For hot rooms, boiler-rooms 
and drying-rooms that run up to 200 degrees, we will 
probably make the temperature at about 350 degrees. I 
have had cases where I have had to use solder which 
melts at 450 degrees over boilers where the space between 
the boiler and ceiling was small and the temperature 
might run up to 300 or 350 degrees. (Applause). 



44 FIFTEENTH ANNUAL MEETING OF THE 

Mr. President — Gentlemen, I feel as one of the mem- 
bers of the Association, that we are very much indebted 
to Mr. Sanderson for his talk on the subject of sprink- 
lers. It is a subject that we were rather unfamiliar with 
on this coast, and I have certainly enjoyed his talk very 
much. 

Mr. Nippert — Mr. President, I move that a vote of 
thanks be tendered Mr. Sanderson for his remarks to 
the Association. 

Mr. Fennell — I second the motion. 

The President — Gentlemen, you have heard the mo- 
tion, that a vote of thanks be tendered Mr. Sanderson 
for his kind presentation of this subject, all in favor of 
it will signify the same by saying aye. Contrary, no. 

The ayes have it. 

Mr. Sanderson — I only want to say, gentlemen, that 
you can assist me in my toil out here by saying a good 
word for sprinklers wherever you see fit. 

The President — Have you any more remarks concern- 
ing the sprinkler system, any discussion? If not, we 
will proceed with the programme. 

We skipped one article this morning by Mr. R. V. 
Watt, on "Ethics in Our Business." We will call on 
Mr. Watt now to present his paper. 

Mr. Watt — Mr. President, and Gentlemen: To read a 
paper on such a subject before an Association of such 
gentlemen as are here assembled, would seem to be 
almost an act of supererogation, but since our President 
has requested it, I will try to comply as briefly as 
possible. (Reading. ) 



FIRE UNDERWRITER-' ASSOCIATION. 45 

THE ETHICS OF THE INSUBANCE BUSIXI 

Webster says, ethic- is "the science of human duty, the body of rules 
of duty drawn from this science, " and another has said, "Ethics is the 
science of morals." 

There are many maxims or injunctions which are intended to embody 
the etchical idea. Probably the most familiar and at the same time com- 
prehensive and valuable rule of ethics, is found in what is known as the 
" Golden Utile." Therefore, all things whatsoever ye would that men 
should do to yon, do ye even so to them; for this is the law and the 
prophets. 

The word, '-therefore. indicate that this sente:. -nm- 

ming up of all the wonderful instructions of the " Sermon on the Mount," 
the "Ten Commandment-,'" and all the teachings of the prophets, packed 
into one short sente: 

For the purposes of comparison and to show the superiority of the 
Golden Rule in its scope, I will quote some wise sayings compiled by Prof. 
G. P. Fisher: 

"Be to your parents," writes the Greek orator Isocrates, "what you 
would have your children be to you;" ai : Do not to others the 

things which make yon angry when others do them to you." Herodotus 
. "What I punish in other men, I will myself as far as I can refrain 
from." What one hates to endure le^ him not do." i.^ the pithy counsel of 
the Alexandrian Jewish philosopher, Philo. Seneca, the Pioman Stoic, on 
the subject of doing favors to others, lays down the rule that we aie "to 
give as we wish to receive." 

There is a curious Jewish tradition which runs as follows: A certain 
Gentile came to the Rabbi Sammaeus, and said, "You shall make m 
proselyte if you will teach me the whole law while I am standing on 
foot." The offended Rabbi drove him away with the stick which he had 
in his hand. Then the Gentile came to Rabbi Hillel who made him 
a proselyte by giving him this reply: " Whatsoever is ha r - 
not to another; this is the whole law; all the rest is explanat: 

And one ha^ said. "Do not unto others as yon would not have th 
to you." 

It will be observed that these maxims, with one exception, are in the 
negative. "Do not.'' "Refrain from," "Let him not do," "Do n 
another." are the negatives; the only poa ■ Give as we wish to re- 

ceive." 

"The Golden Rule" is more noble than them all — " Whatsoever ye 
would that men should do to you, do ye even so to them." Now ] 
try to apply this maxim t " The meaning of the pre 

may seem quite plain without a comment. I am to im self in the 

place of another, and to I would have him act tow 

me. I am to put myself in his position, and proceed as if all that I 



46 FIFTEENTH ANNUAL MEETING OF THE 

were done to myself. What would be my choice and desire were I in his 
place and he in mine? Let me ascertain this and act accordingly . Let 
me deal with him as I would have him deal with me." 

I do not care to dwell long on generalities, but will proceed to name a 
few of the practical lessons we niay learn from the "Science of Morals, or 
of human duty," which, I think, all will agree, is well summed up in the 
"Golden Kule." 

In thinking over this subject for the past few days, I have come to the 
conclusion that there is as much fairness in the Fire Insurance Business 
as in any other, and yet there is evidently ample room for improvement. 

Our business is very much like other branches, in its main features — 
common courtesy and fairness should obtain, but this does not mean 
that prudent and honest business methods should be ignored. No rea- 
sonable man will object to fair competition. Business carried on fairly 
will result in the "survival of the fittest, "and a man should be brave 
enough to say, " I'll be honest and if I have not the ability and energy 
to keep up with or ahead of the procession, I must fall behind." 

There would be a great advantage in such a decision for it would put 
the maker at once on his metal — having turned his back on dishonesty, 
his mind would be clear and his heart stout for the fight. He would have 
the inspiration of an honest intention and his chances for success would 
be immediately multiplied. 

To be a little more specific, just here among ourselves, I'll say that we 
ought to keep faith with each other — get a risk every time we can fairly, 
keep it as long as we want it and can do so fairly; win the good will of 
every local agent in the country if it can be done by fair, manly and 
courteous treatment, or by extending favors, in the manner and method of 
doing business according to pledged faith — not by extra commissions, 
presents or other unfair and dishonest methods. 

A man who will deliberately sign an agreement and more deliberately break 
it, aye, or sign it with the intention of breaking it, is unworthy the name 
of man, and yet we cannot help knowing there are such men among us. 
Such a man cannot look the "Golden Rule" in the face. By that rule, 
he would carry on a manly fight, but contrary to it, he is the man who 
stabs in the back and in the dark, and " Keep it Dark" is the sign over 
his door. 

Under the Pacific Insurance Union, the Ethics of the business would 
seem to indicate uniform rates and commissions, fair and active competi- 
tion, courteous and frank dealings — binding alike upon all. We should 
speak kindly of each other, if we speak at all, and should abhor insinua- 
tion either byword, gesture or shrug of shoulder. 

If we would not like our neighbor to take a risk from us by means of a 
rebate, we must not take one from him by such a method. If we would 
not want our rival to win an agent away from us by paying him a policy 



FIRE UNDERWRITERS' ASSOCIATION. 47 

or survey fee or extra commission in any other way, we must not take his 
agent away in such a manner. 

The Ethics of the business as embodied in our maxim, will take us a 
long stride further. We all know — as a matter of theory, at least — the 
principles of common honesty, and we know wherein these principles are 
violated daily, but even if the negative side of the Golden Rule were ad- 
hered to, we would have to say it does not go far enough; it should go 
beyond that. " Do ye even so to them," is the command. " The Golden 
Rule is a most convenient aid to us in regulating our intercourse with 
others. It presents us with a ready test in judging as to their claims 
upon us. It reminds us that our neighbor's welfare is equally valuable 
with our own, and clears our minds of the bias which springs from inor- 
dinate desire of gain." 

If we would like our neighbor to place a risk with us we must place 
one with him. 

If we would like our neighbor to report to us any information coming 
to his notice detrimental to a risk we were carrying — supposing it to be 
good — we should impart to him such information about a risk he has if 
it comes to our notice. 

If we would be glad to have information about an agent whom we are 
trusting and who is unworthy of our confidence, we should promptly give 
such information to our neighbor who is in just such a position. In 
fact, anything we would be glad to have done for us, we should do for 
others under similar circumstances. " It's a poor rule that won't work 
both ways." 

Special agents have large opportunities in such matters. They can be 
the conservators or destroyers of good faith and practice. Some specials 
fail to carry out their better promptings in regard to imparting informa- 
tion detrimental to risks carried by their competitors, fearing they will 
be charged with officiousness. 

In this country changes come rapidly, and many risks desirable when 
taken become undesirable before expiration, though such a condition 
could not have been anticipated. 

It may be claimed that this suggestion would carry matters too far, that 
men have different ideas of business, and risks considered undesirable by 
some are readily accepted by others; but such instances are not what I 
refer to. I would only report such facts as I might be sure my neighbor 
had not found out, especially in regard to moral hazard. For instance, 
a certain manufacturing concern, remotely situated, was insured by a 
company on California street. A Special Agent of another office chanced 
to be in the vicinity of the risk and learned incidentally that the concern 
was having serious trouble with its employees who were threatening dire 
vengeance to the owners, hinting at fire, powder and dynamite. He com- 
municated the facts to his principal, who at once laid them before the 



48 FIFTEENTH ANNUAL MEETING OF THE 

interested Manager, from whom he received the most hearty thanks. 
This gave him an opportunity to investigate matters and to insist upon 
additional watchmen or to cancel. 

"Do even so to them," would require us to hide no material fact in 
placing business with our neighbors, to place nothing on which we our- 
selves did not write except with the fullest statement of facts as to why 
we keep off. It would require us to notify every office which had taken 
a line on a risk through us if we cancelled off, from any cause afterwards. 

If, in placing business, we have stated that we carry a certain line and 
we afterwards conclude to reduce it, we should notify those who took the 
business from us, for we are all influenced more or less by what our 
neighbor does. 

Adjusters have splendid opportunities of exemplifying these ethical prin- 
ciples, particular!} 7 when meeting with the young adjuster, just starting 
out — what a help an experienced man may be to him, how his anxieties 
may be allayed by a few words from an experienced man. If the first 
adjuster on the scene of a loss having completed his work before the repre- 
sentative of a competitor arrives, will leave the results of his investiga- 
tions in an envelope for him, he will do as he would like to be done by. 

I might continue these specifications all day, but will not tax your 
patience. These are common rules of courtesy and are largely applied, 
but as stated above, there is room for improvement. 

The best of all is, ethics practiced becomes a part and the possession of 
the man. It enlarges his powers and his sphere; it breaks down the lim- 
its of mere existence and places him on a broad and high plane where the 
air is pure, the sky clear and the future full of hope. A clear conscience, 
a firm tread, a steady eye and a consciousness of power are his. 

On the other hand, a disregard of the Ethics of the business, more es- 
pecially the negative side, brings in its trail rewards most miserable. 

To quote again from the book of books: " Whatsoever a man soweth, 
that shall he also reap." I am not an old underwriter, but as I look back 
over the past few years, I can see along the roadside numerous wrecks, sad 
to behold, but the natural and logical results of a disregard of this 
" science of human duty." Some examples of such disregard linger still 
on the shore of time, but their day will come. 

" Though the mills of God grind slowly, 
Yet they grind exceeding small; 
Though with patience He stands waiting, 
With exactness grinds He all." 

EOLLA Y. WATT. 

The President — In Mr. Watt's paper there is material 
for much reflection. The " Golden Rule" is a good one, 
but do we follow it — do we all follow it — and if we don't, 



FIRE UNDERWRITERS' ASSOCIATION. 49 

don't we follow it at least as much as people in other 
lines of business. Can it be said that the bad faith in 
the insurance business is greater, or that there is more 
bad faith in our business than there is in the mercan- 
tile community, for instance, or any other line of busi- 
ness you choose to take? I am inclined to feel that, 
while we have not reached that point where we can 
be called saints in the matter of good faith, I still feel 
that there exists in our business about as much good 
faith as there is in the mercantile business, among the 
lawyers, or in any profession, or business life that you 
can choose. AVe have another paper to be read; it is 
much in the same vein, and it is entitled " Are the 
Ethics of our Business an Evanescent Sentiment/' by 
our old friend Mr. G. F. McLellan, of Los Angeles. 
(Applause). 

ARE THE ETHICS OF OUR PROFESSION AN EVANESCENT 

SENTIMENT? 

Long ago, but at a period subsequent to the operation on reptiles of the 
late lamented Saint Patrick, a distinguished ophiologist was requested to 
write for the Encyclopaedia Britannica an article on snakes in Ireland. 
His essay was as brief as brilliant, and in these words: "There are no 
snakes in Ireland." Of course, I should not think of making my paper 
so brief. 

Are the ethics of our profession an evanescent sentiment? For the 
reason above given, I shall not say, " There are no ethics, and there is no 
profession." My brief discussion of the subject shall be practical, and 
therefore, supposed examples in practice shall be referred to. 

When I entered upon the business on this coast, there were two classes 
of companies — Board and Non-Board. So far as I could discern, the for- 
mer generally lived up to their agreement, and the latter were under no- 
obligations. There seemed to be, and there was, a regard for the rules of 
ethics; but in an evil day, an organization was formed, the foundation 
of which was supposed to be absolute confidence in the morals of each 
member. The first result was a universal abrogation of the rules, and a 
brief, but conclusive contest between the ins and the outs, resulting in 
an ostensible victory of the former, and their absolute overthrow by the 
litter. Terms were made that at once and forever destroyed tl e great 



50 FIFTEENTH ANNUAL MEETING OF THE 

object of the association, uniformity of action, and equality under the 
rules. The motto, which might have been at the start, "Liberty, Equal- 
ity and Fraternity," was badly blotted, and the only word which from that 
time to this any member has been able to read in it, is the first. There 
was liberty with a vengeance, but confined to those who had made their 
fight for it and won, and to others who took it without fighting. The 
equality was, by universal consent, abolished; and the fraternity disap- 
peared in a fruitless search to find it. 

The sentiment of justice which, in the minds of not a few, had led to 
the forming of the Union, yielded place to fear, the fear of losing a few 
premiums, or receiving lesser ones for a while, which usurped its place, 
and from that time on the binding force of the Union became the cohesive 
force of mutual plunder, so that one who has every opportunity of know- 
ing, declares that there are but twelve of the whole body of General Agents 
who can trust each other. 

But what was the result so far as the agents of the ins were concerned. 
Did they invest their meagre earnings in works on ethics, and exclaim, 
so far as they were concerned, " Give me ethical principals, or give me 
death?" On the contrary, quite the reverse. Starving wives and helpless 
children, or the strength of their own lower natures prevailed, and at 
once there began a contest for premiums, regardless of the supposed 
obligations, no longer binding in ethics, because not enforced upon the 
chosen few. 

The saying once, of course, untruly, attributed to a famous college 
president: "Young man, get money — honestly, if you can, but at all 
events, get money," was amended by inserting " premiums" for "money;" 
and to get the premiums those not specially favored in the way of allowed 
commissions were obliged to sacrifice their own raoney. 

When one company could employ 200 agents and solicitors, morals gave 
way to demoralization, and ethics became a vanished sentiment. Again, 
when under the rules of the union, privileges were granted to some which 
meant ruin to others, a regard for ethics would have been suicidal, and so, 
immoral. The dream had vanished. 

Subsequently, a rule was made to the effect that no company could em- 
ploy more than two agents in any one town or city. What had become of 
the ethics of the provision when those who preferred dodging around, 
rather than openly breaking through them with the rapidity of electricity, 
began to vie with each other in the former proceedings, which I do not 
characterize as dishonorable or dishonest tricks, and the putting in force of 
practices, each member attempting by them to get the start of the others? 
When a gentleman is too high-toned to run the risk of punishment by 
direct and palpable violation of the rule in appointing more than the two 
agents, could send Specials to visit every neighboring cross-road, to hunt 
up the plats of townsites which never even possessed the two essentials 



FIRE UNDERWRITERS' ASSOCIATION. 51 

of a boom town, a hotel and university, and there appoint agents, (some 
of whom did not know whether to go north, south, east or west in search 
of the sites for which they had been named), with instructions to devote 
all the time possible in the city already blessed with its two agents, and 
where there were stores, appointing the store-keepers, that they might 
secure from some of the merchants with whom they traded in the city, 
some of their insurance business. Add to these the before-referred-to 200, 
appointed without certificates from the manager, or being obliged to join 
the local compact. When, I ask, this course is not merely tolerated, but is 
defended against complainers with all the power of the Pacific Insurance 
Union, is it worth while to talk about ethics? So when companies can 
work out a beggarly evanescent show of a surplus by making oath to the 
value of property as being six times the value which they have put upon 
it for the purpose of taxation, is there in the English language a word so 
shamefully inappropriate to apply to the act, or the character of the actor, 
as " ethical?" 

When the practical result of a course of proceedings, or a system of 
rules, or such application of them as to offer a premium for their violation, 
and to cause a contempt for the weakness of the moderate honest is the 
result, have not the ethics of our profession become an evanescent senti- 
ment ? 

Years ago, in one of the most beautiful and celebrated cities of our 
country, lived a brown-haired boy. A few rods distant, on one side, was 
the residence of America's greatest poet, and a short distance nearer lived 
the greatest American lexicographer. On the other side, not far distant, 
were the noble elms which shaded the home of one who had then won great 
distinction as a poet and a scholar, and who has since added to that dis- 
tinction the fame of a great statesman and a diplomat. A little nearer 
lived the greatest law publisher of the United States, whose business 
ability was equalled by his culture and education. Still nearer, was the 
home of another gentleman. It was in one of those anti-revolutionary 
houses, with the general appearance of which the many engravings and 
pictures of Professor Longfellow's house have given illustration. 

These gentlemen all met as friends and equals, and every day as the boy, 
passing through the streets, received the cordial "Good morning" of one 
or other of his distinguished neighbors, the pride which was thus 
excited led him to wish with Desdemona, "that Heaven had made him 
such a man." 

The boy is a man. What remains of the hair once brown is now white. 
To have hoped to equal most of these gentlemen would have been a wild 
dream that could only have been begotten of the greatest vanity; but the 
last one named was one whom he could hope, as he then thought, to equal. 
It will surprise all, who judge of the character of insurance men from their 
opinion of the others in the business rather than by contemplating their 



52 FIFTEENTH ANNUAL MEETING OF THE 

own great virtues and abilities, to be told that that one man the boy 
hoped he might equal was an Insurance Agent. 

After a number of years had passed, his health was broken down by 
over-labor; he thought then of the dreams of his youth, and he sought for 
employment as an insurance agent. If to-day he had a son who seemed 
to possess those qualities that nowadays seem to be most sought after in 
agents — the spirit of a tramp and the persistency of a professional beggar, 
unblushing effrontery, falsehood when occasion seemed to make it neces- 
sary, and various other traits of that kind, the father would now pray 
that his son might he taken from him before he had joined the ranks of 
those whom, to quote from Dante, "Heaven would cast out, and Hell 
would not receive. 

GEO. F. McLELLAN. 

The President — Gentlemen, it seems to me that, for 
one who took up his pen only this morning, that Mr. Mc- 
Lellan has succeeded in arraigning the members of the 
Pacific Insurance Union in a pretty good shape, and I 
leave it to you as to whether what he says is true or not. 

Mr. Carpenter — We may say, Mr. President, as be- 
tween him and Mr. Watt, we are getting the benefit of 
the law of average. 

Mr. McLellan— What is that? 

The President — As between Mr. Watt's paper and 
yours, we are getting the benefit of the law of average. 
What he said may seem rather severe, but we want to 
consider that Mr. McLellan is looking at this subject in 
the light of the experience of a man in the field; a man 
to whose notice, perhaps, more than to the notice of 
others, are brought the incongruities and inconsisten- 
cies of our Union, and the violations indulged in — the 
violations which are permitted by offices here who are 
members, and supposed to be loyal members of the 
Union. I, for one, am certainly very sorry that such a 
condition of affairs exists — such a condition as would 
warrant Mr. McLellan in writing what he has written. 



FIRE UNDERWRITERS' ASSOCIATION. 53 

I think that he deserves credit for expressing himself as 
freely as he has. 

Mr. Sexton — Mr. President, I think this condition of 
affairs exists in Los Angeles only, and in but few in- 
stances. 

Mr. McLellan — I am willing to accept that. 

Mr. Edwards — I venture the prediction, if we could 
secure the attendance of all the local agents in the coun- 
try, and they to express themselves as freely as Mr. Mc- 
Lellan has, they would express themselves in the same 
way that he has done. The Pacific Insurance Union 
has not applied the rules and maxims laid down by Mr. 
Watt. They have not placed themselves in the position 
of the other fellow, and looked at the other side of the 
question. They have not properly considered the local 
agent, who is a great factor, and, in fact, I don't know 
but the greatest factor in our business — certainly in se- 
curing it. And that same complaint comes from all 
sides. I think it would be well for the members of the 
Pacific Insurance Union to look at the question from the 
side of the local agent, and I am glad that Mr. McLellan 
has had the opportunity of expressing himself as he has, 
and I should be pleased to have all the local agents do 
likewise. It might teach us a lesson. 

Mr. Carpenter — Mr. President, although I have not a 
reputation for pouring oil on troubled waters, as a rule, 
I must confess that I recognize the great fact that it is a 
great deal easier for us to find fault, than to do better. 
I know when I was running a newspaper that it was 
very easy work to write a slashing editorial criticising 
the other fellow, and everything that was done be- 
cause it was not done right. But it was a great deal 
4 



54 FIFTEENTH ANNUAL MEETING OF THE 

harder to show which was the right way, and how I would 
do it. (Applause.) 

The President — Gentlemen, if there are no further 
comments on Mr. McLellan's paper, Ave will proceed to 
the next one which is on the subject of the " Liability 
of Electric Light Companies to Insurance Companies for 
Fires Resulting from Electric Light Wires. " It is a 
paper which I requested Mr. Van Ness to prepare. I 
want to explain in that collection that when I wrote to 
Mr. Van Vess asking him to prepare a paper I suggested 
this particular subject to him. In his reply he said, 
11 Why, my dear fellow, I don't .know, the fact is 
I am the retained attorney for an electric light com- 
pany, and perhaps it might not suit you." I hastily 
wrote back and excused him from writing on the sub- 
ject, but it seems that he has taken up the topic after 
all, and as Mr. Van Ness is not here to read it himself, 
I will request Col. Kinne to read the contribution. 

Mr. Kinne — (Reading paper.) 

LIABILITY OF ELECTKIC LIGHT COMPANIES TO INSURANCE 
COMPANIES FOE FIRES RESULTING FROM ELECTRIC WIRES. 

Sax Francisco, February 17, 1891. 
Bernard Faymonyille, Esq., 

President Underwriters' Association of the Pacific. 

Dear Sir — In response to your request for a paper touching upon the 
liability of Electric Light Companies to Insurance Companies for damage 
to insured property, resulting from fires caused by the wires of said com- 
pany, I have now to submit the following: 

There has not been so far as I am advised any case decided which di- 
rectly involved this question, and the answer to your inquiry: "Under 
what circumstances, and to what extent does liability, if any, exist?" can 
only be based upon those general principles governing rights and reme- 
dies in analogous cases. It is clear that contract relations do not exist 
between the insuring company and the electric light company, or, as it 
is expressed in legal parlance, there is no privity of coutract between 
those companies. There is privity of contract between the insurer and 
insured; and again, between the insured and the electric light company. 



FIRE UNDERWRITERS' ASSOCIATION. 55 

but as above stated none between the insured and the latter. It follows, 
therefore, that the right of the insurers, upon payment of a fire loss, 
caused by the wires of an electric light company, rests upon a duty aris- 
ing out of the relation of the parties independent of contract or agreement, 
and this right is known as that of "subrogation." It is the outgrowth of 
equitable principle to the effect that a person secondarily liable for a debt, 
upon payment thereof, is put in the place of the creditor, and thus placed 
may make use of all the securities and remedies possessed by the creditor 
against the principal debtor. Speaking of the equitable principle of sub- 
rogation, as above explained, that most learned of American jurists, 
Chancellor Kent, said: "It is a rule which is founded on natural justice, 
and is recognized in every cultivated system of jurisprudence. It rests 
on the basis of mere equity and benevolence." 

The cases in which the right of subrogation may be exercised are quite 
numerous, but those which bear directly upon the subject in hand are the 
ones in which, by reason of the negligence of one person an actionable 
injury has been caused to another to make good the amount of which the 
party claiming subrogation is liable. The injury must be one for which 
an action will lie in favor of the party suffering the injury against the 
party causing it. Thus as no action lies at common law against a party 
wilfully taking the life of another, in such case a life insurance company 
paying a policy upon the life destroyed will not have an action against the 
party causing the death. This has been expressly held by the Supreme 
Court of the United States. 

Another point to be borne in mind is that as subrogation is a legal as 
distinguished 'from a contractual right, no assignment from the party to 
whom the loss may be paid is necessary to sustain the insurer's claim. 
Ipso facto, upon payment of the loss he is, to the extent of the amount 
paid, substituted, or properly speaking, subrogated, to the claim of the 
•original creditor and maj 7 enforce the right thus acquired in his own 
name. 

Fires originating from electric light wires are of comparatively recent 
occurrence, and thus far, I believe, the injuries resulting therefrom have 
been few and of small consequence. But as the years speed by, the ap- 
plication of the electric current to the promotion of the comforts and con- 
veniences of modern life, will bring this comparatively little understood 
agency into more general use, and it is to be anticipated that more numer- 
ous and more disastrous fires will result therefrom. 

Electric light companies, like railroad, gas and water companies, are 
public agencies to be permitted and regulated by law. So permitted and 
regulated, howsoever dangerous they may be, they will not be liable for 
resultant damage unless guilty of negligence. Undoubtedly these com- 
panies must exercise the rights and powers conferred upon them with care 
and must adoj:)t all proper precautions to prevent damage to life and prop- 
erty. They are not only bound to use care, but they must in the prose- 



56 FIFTEENTH ANNUAL MEETING OF THE 

cution of their business employ those agencies which the latest scientific 
discoveries have demonstrated to be the surest safeguards against accident 
or injury to others. 

If an electric light company has erected its lines, made its connections 
and operated its plant after the most approved methods then known, it 
will not be liable for injury to property resulting from fire caused by its 
wires, and hence not liable to the insurer of the property. But, in 
the construction and operation of its plant, it must avail itself of all dis- 
coveries which science has put within its reach for that purpose, provided 
they are such as under the circumstances it is reasonable to require such 
company to adopt. 

If, however, the fire by which the injury is caused be the result of de- 
fective appliances, improper construction, or insufficient care in opera- 
tion, the company will be liable to any person suffering damage by reason 
of such defects or insufficient care, and any insurance company paying 
the loss so suffered will stand in the shoes of the insured and may recover 
from the electric light company the amount so paid. 

In the case of fires caused by sparks from passing railway trains, it is 
upon the party injured to prove that the fire was so caused, and this done 
the burden is cast upon the railroad company to prove that the escape of 
the sparks did not result from its negligence, that is, from defective ap- 
pliances or insufficient care in operating the road. The Supreme Court 
of Minnesota, stating the reason for this rule, says: " There is certainly 
good sense in the rule that proof of proper construction and management 
of the engine should in all cases be required of the company which pos- 
sesses full knowledge of the facts, rather than on the plaintiff, who usu- 
ally can know little or nothing of the engines or employes of the com- 
pany." The rule as above laid down by the Minnesota Court is not 
universally followed in this country, and is, in fact, the opposite of that 
prevalent in other cases of negligence, but it is supported by the great 
weight of authority. 

If it shall be impossible or difficult to determine whether or not a fire 
caused by electric light wires has resulted from defective plant or care- 
lessness in operation, the same rule as that in railroad cases will, doubt- 
less, be applied, and for the reason given in the opinion from which I 
have quoted. 

In the absence of litigation and adjudicated cases resulting therefrom, 
it is difficult to foresee the many nice and complicated questions which 
will arise, or to forecast with certainty what may be the rule which will 
be adopted. From experience in dealing with this class of losses, insur- 
ance companies will originate policy clauses in which I have no doubt 
the courts will detect a meaning never intended by the author, whereupon 
new clauses will be devised, and the race between the courts and com- 



FIRE UNDERWRITERS' ASSOCIATION. * 57 

panies will continue until policy provisions will be evolved which mean 
the same thing to the Court and to the companies. 
Respectfully yours, 

T. C. VAN NESS. 

The President — Gentlemen, the next number on our 
programme is a paper by Mr. George F. Ashton. Mr. 
Ashton promised to prepare a paper; but his last trip 
was toward Montana, and as I understand when he got 
there he concluded to go back home to see his people in 
the East, I imagine that he has forgotten to prepare an 
article, as he has not furnished me with the paper, or 
said anything as to his inability to comply with his 
promise, and under the circumstances we will have to 
pass that. 

The President — I think Mr. Gunnison has left town, 
but he left his paper with me to read. 

LETTER ON "BREACH OF TRUST." 

13. Faymonvillf., Esq., 

President Underwriters' Association of the Pacific. 
Dear Sir — With many regrets that, for the first time since its organiza- 
tion, I am obliged to be absent from the annual meeting of the Associa- 
tion, I will take the liberty to write my little speech, and trust that it will 
have my usual luck of stirring up a debate, of more or less extent, upon 
the subject w r hich I should introduce if I was favored with the privilege of 
meeting with the boys this year. Late developments in the agency field 
have suggested to my mind — and the idea is not wholly original with me, 
either — that something must be done to stop the wholesale embezzlement 
that the business of underwriting has been subjected to. It is an evil that 
must be checked! Let us admit that tlie course pursued by the companies, 
themselves, in granting long credits and temporizing with agents — before 
and after a defalcation is known — lays the company's manager open to 
criticism and great blame, and all that; still the evil exists, and is none 
the less an evil. Like the Indian troubles which, while knowing that 
great provocation exists, the white man finds no time to ask forgiveness 
when the red devil holds the scalping-knife over his head, so we must 
fight or be scalped. (No allusion to "scalpers " in the business in this.) 
It is time to wipe this evil out. But how to do it? There has much been 
said upon the "credit system," and I sincerely hope some action may be 



58 FIFTEENTH ANNUAL MEETING OF THE 

taken by the Association, at this meeting, toward a solution of the prob- 
lem. While it will check, perhaps, it will not prevent embezzlement, de- 
falcation or breach of trust, or whatever name you may choose to call it 
by. One great trouble in the way of prompt measures t6 stop this evil is 
that, in most cases, there are several companies represented in the 
defaulting agency, and each is actuated by different conditions and minds, 
only agreeing upon one or two points mostly in regard to saving all they 
can from the wreck, and looking toward saving the business in the future. 
This is all right, and all within the province of the special agent sent to 
look after the company's interest. Here is where I want to make my 
point, if I am happy enough to make a point out of this subject. I wish 
to say that the above should be the only duty of the special agent, coupled 
with the province to determine the fact as to the existence of embezzle- 
ment, and so report to his company or companies. Having so reported, 
he should go about the legitimate business of a special, collecting all he 
can, arranging for a continuance, and saving the business, etc. 

The suing of the agent, or arrest for embezzlement should not be a part 
of his duties. To arrange for this, I would suggest the formation of a 
bureau, the duties of which should be the winding up of the affairs of 
defaulting agents. It could be called "An Insurance Collecting Bureau," 
or " An Insurance Clearing House," or any other name desired. To this 
bureau could be intrusted all cases where it becomes desirable to use the 
law, or otherwise enforce settlement. Probably one bright man, represent- 
ing the bureau, would be able to do all the field work, and most of the clerical 
work of the same. By thus representing all the insurance companies, in 
one head, to whom claims could be assigned, no one company would fear 
the responsibilit} T of making arrests. A few, very few, cases of prosecu- 
tion for embezzlement on this Coast would work a wholesome lesson to 
those who speculate upon the unauthorized funds of others, and very 
soon make the office of the bureau representative almost a sinecure. 

The above is merely a suggestion, and may be better and more tersely 
put before you, at this meeting, by a more able pen than mine. If there 
should prove to be some one present who entertains like views, who will 
offer a resolution embodying the idea, as the sense of the Association, I 
trust it will find a " second," and sufficient advocates to pass. 

Hoping your administration will close in a blaze of honorable glory, I 
remain, humbly yours, 

A. E. GUNNISON, Special Agent. 

San Francisco, Cal., February 13th, 1891. 

The President — Gentlemen, Mr. Gunnison has touched 
on a subject of vital importance to underwriters on this 
Coast, and in making his remarks and his suggestions I 
think he has overlooked the experience of* the Commit- 



FIRE UNDERWRITERS' ASSOCIATION. 59 

tee on the Credit System. As I remarked in my address 
this morning, that committee worked hard and long. 
While primarily it was supposed to be a committee to 
handle the subject of collections, we nevertheless hoped, 
in a secondary way, to cover this very thing, for we all 
felt that our neglect to collect, was, in a very great meas- 
ure, the reason why there were so many defalcations on 
this Coast, but unhappily our experience in that com- 
mittee was not what we had expected or hoped for. We 
did not receive the necessary support, and I verily be- 
lieve that had we been able to carry through the plans 
w T hich we adopted at that time, the point made by Mr. 
Gunnison would have been covered. I think that under 
the plans which were proposed, it would have virtually 
done away with all that trouble. To go on and say this 
is better would be to open the same old subject, that is, 
the subject of the credit system, for the two plans 
travel almost parallel, and inasmuch as the plans of the 
Association which we were not able to put into successful 
operation, have been referred to the Pacific Insurance 
Union through a committee consisting of Mr. Haven, 
Mr. Lowden and Mr. Spencer, I think perhaps it would 
be just as well to w T ait until we can see what success 
those gentlemen have in interjecting, so to speak, our 
plan into the Union. If the Union will adopt it I verily 
believe that the trouble, to a very great extent, will be 
cured. I should be very glad to hear remarks on the 
subject. It is one that we are all interested in, and I 
do not hesitate to say that I would like to hear remarks 
in support of some plan. 

Mr. Carpenter — I will say generally, what I have said 
to you privately, that I think our great fault is, we de- 
pend too much upon legislation. I think it pervades 
the insurance world just as much as the world at large. 



60 FIFTEENTH ANNUAL MEETING OF THE 

I think the fewer laws and regulations you can have, 
the better you are off. 

The President — I will say that, if we are to haye or- 
ganized action on that plan, I belieye that the subject 
could be handled in connection with the Union about as 
well as it could be by a separate bureau. Without the 
worry, without the office, and without the expense of 
carrying out a bureau of that kind, for maintaining it. 
And if it can be done by organized action, I think it 
can be done through the medium of the Pacific Insur- 
ance Union. If it comes down to individual action— if 
we are to carry it through individual action — then it be- 
comes unnecessary to refer the matter to the Union, or 
to establish such a bureau as Mr. Gunnison suggests, be- 
cause in either case concentrated action is contemplated. 

Mr. Edwards — Mr. President, I move that the matter 
be referred to the committee appointed by this Associa- 
tion to lay the Credit System' before the Pacific Insur- 
ance Union. I believe that we have such a committee, 
have we not? 

The President — Yes, sir. 

Mr. Edwards — I move that the matter be referred to 
that committee, with a request that they present the 
matter to the Pacific Insurance Union. 

Mr. Wetzlar — I second the motion. 

The President — Gentlemen, it has been moved and 
seconded that the communication of Mr. Gunnison, rel- 
ative to breach of trust, be referred to the committee 
appointed by this Association, to whom was referred the 
plan for the cure of the credit evil. You have heard 
the motion, are you ready for the question ? 

Mr. Watt — Does that motion mean that we approve 



FIRE UNDERWRITERS' ASSOCIATION. . 61 

the establishment of a collection bureau, and a commit- 
tee or body of some sort — is that what that motion 
means ? 

The President — I take it that it goes to the committee 
without any comment, or without any endorsement 
either way. It is merely referred to them. 

Mr. Watt — I think it is in rather a crude condition; 
do we know what we are doing? 

Mr. Edwards — My object in making this motion was 
this: It is evident that we cannot, as an Association, 
tackle successfully the credit evil, or organize any bu- 
reau for any collections, or anything else in fact, in con- 
nection with the matter. There is but one power in this 
underwriting field, and that is the Pacific Insurance 
Union. This suggestion that conies to us, may be of 
value, and I think proper to lay it before the committee 
of this Association which has been appointed to present 
matters almost identical to the Pacific Insurance Union. 
To that committee this paper should be referred, and 
they can submit it to the Pacific Insurance Union if 
they wish. It may contain nothing that would cause 
action by the Pacific Insurance Union that would be of 
benefit to us. 

Mr. Nippert — Has that committee rendered a report? 

The President — The committee at this time has made 
no report. 

Mr. Fennell — Who constitute this committee, I would 
like to ask. 

The President — The committee appointed by the 
President consists of Mr. Haven, Mr. Laton and 
Mr. Spencer. The plan of the Association was trans- 
mitted to each of these gentlemen. They were notified, 



62 FIFTEENTH ANNUAL MEETING OF THE 

in fact they were requested to act on this committee, 
and they all acquiesced. They have the plan of the 
Association before them now, and, presumably, are 
working at the matter. 

Mr. Watt — If you will allow me one more word, I do 
not object to referring anything to a committee of 
this Association. If it is simply a question of refer- 
ence to the committee I don't make any objection. 

The President — As I understand the motion of Mr. 
Edwards, it is that we refer to them. 

Mr. Watt — Without either endorsement or recom- 
mendation. 

The President — Yes, sir. Simply refer it to them for 
consideration, or to act as they see fit. Are you ready 
for the question? All in favor will signify it by saying 
aye; contrary, no. 

The ayes have it, and the question will be so re- 
ferred. Mr. Secretary, you will please transmit it to 
the committee. 

Xow, gentlemen, some years ago the Association 
adopted a schedule of adjusters' charges, and also a plan 
of apportioning the charges among the companies in- 
terested. Things seemed to work along pretty well for 
a while, then trouble began; objections were raised to 
the method, and the subject was brought up before some 
of our monthly meetings; in fact, it was brought up re- 
peatedly, and as it was a matter that affected all the 
companies and the adjusters, we finally concluded, in- 
stead of taking definite action at any of the monthly 
meetings, which are usually attended by but a small num- 
ber, we delayed the matter until our annual meeting, 
and it now comes up for discussion. I will say that I 
requested Mr. Sexton, Col. Kinne and George Grant to 



FIRE UNDERWRITERS' ASSOCIATION. 63 

sort of prepare themselves before, and I am ready to 
hear what they have to say on the subject. This does 
not mean that no one else will have an opportunity to 
say anything. We are all interested in this subject, 
and any one who has any idea concerning those charges 
or methods of apportionment, we shall be very glad to 
hear from them. 

I have a communication from Mr. Sexton, and I will 
refer it to the gentleman; he can read it himself. 

Mr. Sexton — That was in the nature of a letter that I 
understood you wanted, and I prefer that it be read in 
that way, because I wrote that when I was going away 
from home and did not expect to get back here again 
until after the annual meeting. I have forgotten ex- 
actly what it contained. You have read it, probably, 
and I would suggest that you speak it out. 

The President — Under the circumstances, I will read 
Mr. Sexton's position in this matter. He says: (read- 
ing.) 

;San Francisco, January 22, 1891. 
Bernard Faymonville, Esq., 

President of Fire Underwriters* Association of the Pacific .^ ___ 

In accordance with your notics of December 30, 1890, that you had se- 
lected three members to disagree, and to report their disagreements to the 
Association, on the subject of "Adjuster's charges and apportionment of 
same," and having been honored by you as one of the three, I beg leave to 
discharge that duty by reporting and recommending as follows: 

First. "Charges." 

That no fixed per diem be adopted other than a limit or maximum 
charge of not over $20 per day, and all expenses. 

Our present fee system compels an adjuster to charge |20 per day for sim- 
ply filling up an agreement for appraisal on a building, requiring but little 
work and no skill, waiting for the report of the mechanics, and filling out 
the proofs. This charge for this class of work has a tendency to discour- 
age the employment of adjusters by companies in interest, in such a loss, 
and to give the settlement to the local agent, not a good method, and 
should not be forced. 

Our present system provides for a per diem of $'15 in certain cases, and 



64 FIFTEENTH ANNUAL MEETING OF THE 

$20 in others; this is wrong, the per diem should be the same whether an 
adjuster works on one or more losses, a larger number of losses will take 
more days, but there cannot be an exposure charge for wear and tear of 
brain power because of a block of losses, instead of a single loss. 

Second. "Apportionment of charges for adjusting losses." 

The losses resulting from any single fire settledby an adjuster, shall bear 
the per diem and hotel and traveling expenses, from the place from which 
he was sent at place of fire, and return to place from which he was sent, 
whether he returns or not, in proportion to the amounts at risk and ad- 
justed on, except that small damages, short form, less than $100, if pro- 
portion exceeds $5, shall not pay more than $o for each proof, which sums 
shall be deducted from the adjuster's bill and the balance apportioned to 
the larger losses. If none of the losses exceed S100, then the total of the 
adjuster's bill shall be apportioned as above. 

Special charges for appraisers, telegraphing or other services for partic- 
ular losses, shall be charged to such losses. 

An adjuster taken up at any place to attend to a loss at that place from 
a fire other than the fire that caused his visit, shall charge per diem and 
hotel expenses for time on such loss. An adjuster taken up at a place to 
attend to a loss at another place, shall charge per diem and expenses from 
the place where taken up, to the loss, at loss, and return to where taken 
up, whether he returns or not. 

Third. 

An adjuster sent from or taken up at a place to attend to loss 
at two or more places on the same line of travel, shall make all of 
the sums of the losses in the two or more places, contribute to the per 
diem and traveling expenses to the place of the first loss reached, and re- 
turn to place where sent from, or taken up at, whether he returns or not, 
and shall make the losses at the place first reached (No. 1) pay the per 
diem and hotel expenses while settling such losses. 

If there be two more places to visit, this rule will apply to place No. 2, 
and the losses at No. 3, the last place will pay for all expenses from No. 2, 
to place No. 3, at No. 3, and return to No. 2, whether he returns or not, 
the losses at No. 3, or last place having also contributed in proportion for 
share of per diem and traveling expenses while en route from place where 
sent from or taken up at. 

The word adjuster applies to special agent, manager, general agent, ad- 
juster, or whoever settles a loss. 

Respectfully submitted, 

WM. SEXTON. 

Now, gentlemen, I would like to hear from Colonel 
Kinne on the subject. 

Mr. Kinne — Mr. Chairman, and Mr. Sexton. The 



FIRE UNDERWRITERS' ASSOCIATION. 65 

idea was stated correctly that Mr. Sexton had been noti- 
fied, and Mr. Grant had been notified, and Mr. Kinne 
had been notified, that we should have something to say 
in the way of putting the ball in motion, and then 
the others, of course, could give their ideas regard- 
ing the amount of fees, but more particularly as 
regarding the method of apportioning the expenses. 
Mr. Sexton having dignified the discussion by a 
very lengthy and much mixed up paper which very 
few of us could understand from a casual hearing of it, 
of course I am a little bit at a loss to know exactly which 
of its salient points to attack first. But as the one about 
the change of the fee for the adjuster was alluded to first 
by him, if I remember rightly, it seems that ought to be 
the first matter to consider. I w r ish George Grant was 
here, I do not see him in the room, but there was an ex- 
pression that he made some years ago that has always 
guided me a great deal, and a point that I have consid- 
ered in my own mind somewhat carefully, and that was 
this: Always try to bring some good into the business. 

Now, it seems to me that after discussing the matter 
and considering the idea of compensation for practiced, 
experienced men, as we have in the past, and finally ar- 
riving at a decision that was unanimous on the part of all 
the then members of the Association, to have laid before 
us to-day a proposition to erase the word minimum, and 
put in its place maximum is going to bring most any- 
thing but good into the business. 

It is opening up the door, as w r e discovered years ago, 
to having anybody, any person, any individual, local 
agent, tramp, or anybody else, that may call himself for 
the time being an adjuster because some manager has 
clothed him with an envelope containing blank proofs 
of loss, and therefore possessing the power to look after 



(5G FIFTEENTH ANNUAL MEETING OF THE 

the adjustment of a certain loss for him. The idea pre- 
vails that the minimum price shall be fifteen or twenty 
dollars, as the case may be, but if you can fix a max- 
imum price of $2.50, which is more than a man is worth 
often times; if they are coming down to a proposition of 
that kind, where experience is worth nothing; if they 
are trying to get the best men to do the work, if it is 
worth anything at all, I believe that the minimum price 
should be fixed, and if you want a better man hire him, 
and pay him a better price, but don't fix a maximum 
price and push the scale down instead of up. This is 
not the kind of arrangement that we want. We want 
something that will cut it off at a certain point, or some 
degrees higher. We don't want any low grade adjuster 
in ours, it seems to me, and when Mr. Sexton talks about 
having an opportunity of hiring somebody wherever he 
may find them for $1.75 a day and expenses paid, if he 
has any, that kind of a man usually has no expenses, 
and the assured gets the best of him every time. When 
we talk about a thing like that, it seems to me it is 
against common sense, good practice and intelligence in 
the way of what we expect from the adjuster; that it is 
hardly worth spending our time about. 

I don't know whether friend Sexton was introducing 
this little matter before us as a joke or not. He is fond 
of joking, and sometimes, with my long acquaintance 
with him, I never have found out when he was in earn- 
est and when he meant to make fun. It seems to me this 
is a very fanny proposition as regards the matter of the 
maximum price being fixed and not the minimum. I 
am in favor of letting the proposition stand just as it 
reads to-day. As regards the two classes: if it should 
come to a matter of considering a proposition as to 
whether $15 on a single loss, and $20 where there were 



FIRE UNDERWRITERS' ASSOCIATION. 67 

two or more losses, that, of course, is worthy of con- 
sideration. Possibly the figures are not too high; pos- 
sibly they are too high, but as he considered that propo- 
sition next in his paper, that there should be no differ- 
ence between whether an adjuster was attending to one 
loss, at a certain point, or two or more, the proposition 
is one that no doubt attracts the attention, and creates 
a certain amount of thought in the mind of every one 
present. The principle upon which the proposition was 
based when it was adopted, was that as soon as the ad- 
juster reached the point where he had two or more losses 
to look after, that one generally being upon a build- 
ing, and the other upon the contents, that is, as it or- 
dinarily is, unless it is some sweeping conflagration, 
when the same line of argument would hold good, or 
whether it was two companies interested, two losses 
upon the contents of two buildings — the principle would 
be the same. Then he would start one of the appraisers 
at work, would set the machinery in motion to have 
Mr. Brown's loss attended to; he w r ould at once, while 
that matter was being looked after, while the local agent 
w T as hunting for a carpenter, or getting the man to a 
certain point that was going to act as appraiser on a 
stock of goods, or furniture, or w T hatever it may be in 
the dwelling-house, that he would then be occupying his 
time looking after the other loss. Then he would not 
consume the same time. He would be doing more work 
actually than he could possibly if he was there upon one 
loss only. In one case, he is at work between times 
upon the one loss while the other is being in process of 
adjustment. And in one day, every man who has ad- 
justed a loss knows it well — in one day you often look 
after two losses just as well as you could after the one, 
because the loose time, so to speak, the hours that are 



68 FIFTEENTH ANNUAL MEETING OF THE 

not used for the one are used upon the other, and no 
company has ever yet kicked about the proposition that 
they were paying $20 a day when there were two to con- 
tribute, instead of 115 for one. But that, of course, is 
a matter that cuts no particular figure, if you want to 
make it less. It seems to me that the adjuster's fees 
should, in all cases, be not less than §20, and that we 
should have a minimum price fixed at §20, and not at 
$15 in one case and $20 in the other. I would raise the 
$15 up to $20, which is my idea about the thing, hav- 
ing carefully thought over it for a great many years. 

Coming to the next proposition of how to apportion 
whatever charge is fixed upon, is the important point, 
and that is the rock upon which so many of the man- 
agers split, because they do not seem to fully compre- 
hend that our interests are mutual, and that we don't 
wish to establish the principle that was in vogue years 
ago, of picking up a man after he got to a certain point, 
and letting that company take the mean advantage of 
not having to pay for his getting there. This matter 
was found to be such an abused principle, that it called 
out the very resolution that is now under discussion. 
Managers who are to-day signing checks and paying 
losses and kicking about the amount that the adjuster is 
to get from his company when another company is in- 
terested with him, are the very ones, as a rule, that were 
warring about what they should pay, and what they 
thought the other one ought to. And they would, if they 
could, go back to the old principle of having an ad- 
juster somehow or other landed at Spokane Falls, and 
somehow or other they knew that they had a loss there 
after he got there, although they never heard of it be- 
fore, although the loss occurred at the same time ours 
did, and, after he is there, they hurry and telegraph to 



FIRE UNDERWRITERS' ASSOCIATION. 69 

him please look after the blank loss in his company, and 
then they would simply pro rate on their proportion, as 
they considered it, of his time w r hile he was there on 
that loss, forgetting that he may have been sent from 
San Francisco; forgetting that we have not changed our 
resolutions so that there are central points, and every- 
body sent is not considered to have been sent from San 
Francisco; forgetting all these things, and that there 
can be other central points whenever we desire to make 
them. We have made Portland, Helena, Salt Lake City, 
central points. We can make Los Angeles a central 
point; and we can make Sacramento a central point, if 
necessary. That we can make every town of any note 
or importance where any one resides that is competent 
to look after losses; make them central points, and cause 
the per diem and expense to begin there. They forget 
this, and they want you, as I have listened to them, 
whenever we were placing the matter before a little con- 
course of two or three on the streets, in the offices, in 
the same old shape to which they would take a person, 
at a certain point as outlined by Mr. Sexton's question, 
only in that respect not quite so bad as the balance of 
the paper did; take him at a certain point and then shift 
him over to somewhere else, and when he is there he 
can get back to point number two, it is only ten miles 
distant perhaps, and have a sort of conglomeration of 
charges and back charges and recharges until finally he 
fires them off in a sort of blunderbuss fashion, and no- 
body knows how to figure them up anyhow. Now what 
reason can be brought for wanting to change the present 
system, it seems to me, is what we should be driving at. 
Not that another way is different, and therefore better, 
but what is the harm of adhering to the present system. 
It was thought out carefully, discussed fully, adopted 



70 FIFTEENTH ANNUAL MEETING OF THE 

unanimously, and I can see no reason in my mind 
why the computation of expenses and per diem as laid 
down there is not just as proper to-day as it was then. 
I believe firmly that it is the only correct, honest sys- 
tem. It is the only system by which our mutuality of 
interests can be subserved, and the expenses will be 
charged as they ought to be. No matter what case 
you can bring up; I can see reasons why we should 
not adhere to the same principle that we are gov- 
erned by to-day. Take the special agent of a com- 
pany who may be at Spokane Falls, a loss occurs at 
Athena; the central point is Portland, but the special 
agent went from here to attend to the business of the 
company. What is the rule? That from Portland only 
shall the expense be figured, where there is such profes- 
sional adjusters as Cole, Outcalt, Drake and half a 
dozen others whose services are attainable. Therefore, 
from that point to Athena should charges be made, 
and being a special agent on business for his com- 
pany, one half the expense from Portland to Athena 
shall be borne by the company that sent him; the ex- 
pense of time and expense of travel has to be borne by the 
companies even if he were in Athena at the time. We 
wanted his services, and got them in good shape. I 
contend that because he is there, they have saved one- 
half of the expense of sending Mr. Cole or Mr. Outcalt 
to Athena, and that is quite enough for them. But be- 
cause Mr. Brown, or Smith, or Jones, the special agent 
for that company, happens to be in Athena, it is no 
reason why they should pick him up there at a town five 
miles aw r ay, and then say that is all the expense that 
should be paid. If you don't want his services, send 
somebody from PQrtland and pay ail his bills — that is 
the proper way; because, just as sure as you change from 



FIRE UNDERWRITERS' ASSOCIATION. 71 

the present proposition, you will drift right back to the 
point where the impecunious manager would do to-day 
as he used to do: wait until the man got there that was 
sent from here, and then ask him to adjust the loss, and 
then he would only pay his little five hours' work to get 
it done. I want to know which is the best system? 

Mr. Sexton — I did not suppose that Mr. Kinne was 
going to take an hour to say so little. There seems to 
be a joke about this matter; in fact, I think the joke is 
on me. The President wrote me a letter stating that 
simple resolution, and that Kinne, Grant and myself 
were asked to give our opinion, and I supposed in writ- 
ing. Now I expected that Kinne would have an opinion 
to give — he has always got an opinion. I would like to 
have Mr. Kinne write an opinion and file it. I suppose 
that Mr. Kinne and Mr. Grant would have their ideas 
filed here so that we could discuss them; that is what 
they are put in for, and I have got caught, and the joke 
is on me. Another thing: it is allowing a man to charge 
seventeen trips back to Portland from Athena, Colfax, 
Lewiston, and other places, where he did not make any 
back trips. These cases are some of the reasons why 
people do not like the present system. 

Now I have got to catch a train in about four minutes 
to see the balance of the Sexton family; and I would 
like to say that if Colonel Kinne will have some ideas 
here in the morning, we will talk them over. 

Mr. Kinne — Mr. Sexton, very evidently, don't under- 
stand the rule. There is no such item in the rule, and 
it never has been carried out by any practical adjuster, 
as charging to a point and back again, and then to 
another point and back again, and so on. The rule 
don't so read; it never has been so. It never was in- 



72 FIFTEENTH ANNUAL MEETING OF THE 

tended to be done, and no honest adjuster ever has — 
and they are all honest. Just read the rule. 

Mr. Edwards — I don't believe that I ever heard of 
anybody desiring to murder his own child. The pres- 
ent rules that we have now were adopted some years 
ago, and amended since, however, by the unanimous 
vote of the Association. Col. Kinne is a peculiar man; 
if he is not strong he is nothing. When he undertakes 
to carry a point, as he sometimes has, we find him with 
a power to manipulate it and carry it regardless of al- 
most any obstacle; hence by his force, by his shrewd- 
ness, by his management, he forces all of the members of 
the Association to his way of thinking, and now, since 
the members have had an opportunity to get out from un- 
der that susceptible influence that permeates every one 
in his presence, they have got to thinking for them- 
selves, and they find some radical wrongs in the present 
rules. Now friend Sexton may not have expressed him- 
self in the best manner in the world, at the same time- 
he has the general idea that should be adopted by this 
Association. Our rules should be amended. And I will 
give you a few illustrations. Some years ago; it was 
two or three years; I was in Montana, and called upon 
to adjust a number of losses for various companies. I 
adjusted my losses, and when I went to make up my bill 
of expense I charged $20 a day under the rule that per- 
mitted me to charge this sum when more than one com- 
pany was interested. Now, as to traveling expenses, I 
found the rule said that we must charge fare and per diem 
one w r ay from San Francisco to the point where the loss 
occurred. That rule has since been amended to make 
other central localities. What did I do? I charged for 
three days' service that I did not drag into the office. 
I charged the expenses back to San Francisco, amount- 



FIRE UNDERWRITERS' ASSOCIATION. 73 

ing to about $65 or 170, and that I did not earn. What 
had I in my pocket when the end was reached? I had 
my $20 per diem, for the days I had served, in other 
words, I had all the money I had earned. Now, what 
did I have besides? I had three days at $20 amounting 
to $60. I got paid $75 for what? Is there any force in it? 
I believe in paying to every man what he earns justly and 
honestly, but not in paying him something which he does 
not earn under some technical rule, which was certainly 
the case in this instance. I don't believe that we should 
pay the return charges for anybody, in any case, be- 
cause we have already received what we earned during 
the time we were adjusting the loss. We receive fair 
compensation for our services, and this charge of ex- 
penses and per diem back to some central locality is pay- 
ing us for what we do not earn. Now Col. Rhine's idea is 
this: The company cannot send somebody from one of 
these central localities to the point of the loss without 
paying expenses both ways, and they save one half of 
this traveling expense and per diem. What matters it 
what they save? Are we not paid w r ell for services ren- 
dered when we are paid for all the time consumed upon 
that loss, and the expense incurred in the adjustment of 
that loss? And is it fair for us to deliberately take 
money that we do not earn and stick it down in our 
pockets because they would have to pay more if we did 
otherwise? It appears to me that it is a ridiculous 
proposition and should not be in our rules for determin- 
ing adjustments. And again, the proposition of charg- 
ing $20 a day when we are on two losses, or $15 a day 
when we are on one loss, is just as ridiculous as the other 
proposition. If your time and your great learning, and 
long experience is worth $20 in one case, it is in the 
other, and you should have justly what you are worth 



74 FIFTEENTH ANNUAL MEETING OF THE 

and just what you earn. Now I believe that our 
rules should be amended, upon the plan outlined by Mr. 
Sexton, so as to do away with these things that hatched, 
— I don't know whether they hatched in the brain of 
Col. Kinne or not, but I think they did, because he is 
so tenaciously sticking to them. I hope that we will 
rise above him; not permit him to hold us down to the 
idea because it was adopted along time ago — and that it 
was another one of Kinne's ideas. We discussed this 
thing fully, carefully and devoted great time and atten- 
tention, and all our minds to this, and that is the out- 
come. Now why not let it alone? He forgets that the 
world progresses, and that we learn a little more as we 
grow older. Probably he does not, but I believe the 
average man does, and I believe that we have learned, 
and he has also learned, that this rule should be amended 
in the line that Mr. Sexton has outlined. He will not 
acknowledge that he has learned that, but I believe he 
has. I believe down in the bottom of his heart that he 
feels that it is not just right, and should be amended, 
but it is his child, and he don't want to see it killed. 
Now, I am perfectly willing to save the child; I don't 
want it killed, but maim it, cripple it! 

The President — I see Mr. George Grant here. He is 
one of the gentlemen whom I invited to say something 
on the subject and I should be very glad to hear from 
him. 

Mr. Grant — Mr. President, and Gentlemen: It is 
true, the President invited me to say something, but 
I gave it no thought whatever owing to other mat- 
ters, and I have not had the advantage, the pleasure, of 
listening to the discussion that has gone before. I be- 
lieve, however, that each company has a right to make 



FIRE UNDERWRITERS' ASSOCIATION. 75 

a contract or have an agreement with another company 
in regard to their special in the field acting as adjuster. 
I believe independent adjusters have a right to issue the 
terms upon which they will adjust losses of the com- 
panies. I think the matter of the per diem can be easily 
arranged. My own opinion being $15 a day in these 
days when we can reach points rapidly by rail, is suffi- 
cient. As for taking a man from a certain spot and di- 
verting him to another — I believe if an adjuster starts 
for a loss for one or more companies, and another office 
desires his services on that loss, or, at the same conflag- 
ration, the last company should contribute with the 
others for all his expenses. If, however, being on the 
ground, another fire occurs on the same spot, I think 
the company not originally represented has the right to 
his services at his per diem on the ground — taking ad- 
vantage of the fact that he is there. I believe that where 
a man is diverted from one point to another, his expenses 
and per diem should be paid from that point to the place 
of loss and return to that point by the company or com- 
panies engaging his services. That, it seems to me, 
covers the whole ground. If I have omitted anything 
that you would like my opinion upon, I should be pleased 
to hear it. 

Mr. AVetzlar — Mr. President, I have not had the pleas- 
ure of listening to the entire remarks of Mr. Edwards. 
I did have the pleasure of listening to the ingenious re- 
marks of Mr. Sexton as given by you in his communica- 
tion, and also to the earnest exposition of his opinions 
as given by Col. Kinne, and have listened with pleasure 
to what Mr. Grant said to us upon the subject of adjusters' 
charges and the proposition of apportionment. To say 
that I am somewhat surprised expresses it mildly. To 
find brother Edwards standing up there and advocating 



76 FIFTEENTH ANNUAL MEETING OF THE 

a thing that I have known him in committee to be ex- 
actly opposite in, taking entirely different views, and 
then getting up here and speaking as he has, when as a 
matter of fact he starts out with reference to this being 
a progressive age, an age of progress, and that 815 a day 
in this progressive age is ample compensation for an ad- 
juster, I must say that I am surprised. 

Mr. Edwards — I did not say that 815 was ample com- 
pensation. I said if $15 was ample compensation in ^ne 
case, it was in the other. It should not be 815 in one 
case and $20 in the other. 

Mr. Wetzlar — I can only apologize to the gentleman, 
that what he said in part, I did not hear, not being with 
you; hearing the latter part of your remarks. I don't 
wish to misquote anybody. I will say this, that it strikes 
me as surprisingly strange that in as intelligent a col- 
lection of men as we have here in the insurance busi- 
ness, representing the brains of the profession, that they 
don't appreciate what it is to be an adjuster. If com- 
pensation is to be fixed as a maximum by this associa- 
tion, it ought to be fixed at 81.50 per day. I think that 
really would be ample for a great many men who air 
now sent out to adjust losses. If the fees now received 
are too large, I would say to any gentleman who has 
that idea, look at the adjusters in the business. There 
is not one of them that owns a handsome brown-stone 
front on Nob Hill. There is not one of them that has 
got a handsome bank account. There is not one of them 
that does not do ten times as much work as any man- 
ager, if he is honest in his work. His work is not sim- 
ply finished at the time when he has adjusted that 1"--. 
It requires good, careful, hard, wearing study t<> keep 
up with this progressive age, and it is twice a- hard t<> 
settle a loss to-day as it was ten years ago. 



FIRE UNDERWRITERS' ASSOCIATION. 77 

I find, as a rule, that the great difficulty in the charges 
of adjusters does not come from the adjusters them- 
selves; it is not the dissatisfaction of the companies 
themselves. It is, that the adjusters' charges are made 
by men who know absolutely nothing about charging, 
and who charge and apportionate losses not in conform- 
ity with the rules now in existence, but with rules — I 
don't know where they pick them up. I have yet to 
learn of the first case that I have had to adjust as an 
adjuster, where the company has ever found fault with 
the apportionment, and with the present existing rules. 
That points of defection, the central points, as you call 
them, can be more advantageously ar-ranged, there is 
no doubt. That is, only the minor details of the opera- 
tion; that is true, too. I will say to you this, if you 
want to drive good adjusters out of the field, and have 
them seek positions elsewhere, this Association will 
lose, and it is bound to lose, wherever you undertake to 
drag down the price for honest labor to where honest 
men cannot conscientiously continue in the business. 
Go on and cut down the adjusters' charges. I have 
never found a first-class concern to object to paying $15 
a day on one case, nor $20 on two cases, and I doubt if 
there was ever such a case. The charges are the same 
here as in the east. I have had it remarked fre- 
quently in my presence that we are charging more than 
they pay in New York city. We are not charging as 
much as they get in New York city. An adjuster in 
New York city, when he has more than one loss, if he is 
a professional, gets his $25 a day. And I will say that 
gentlemen have stated right here on this floor that you 
pay no more to those engaged on losses than they do in 
New York. I have found that to handle four or five 
losses a day was a tremendous strain upon a man, and 



78 FIFTEENTH ANNUAL MEETING OF THE 

to keep it up night after night is still greater, and the 
pay that he gets in addition for that, is not for the ad- 
ditional strain alone.. It is for being able to do his work 
so much quicker and gain on it, and not the per diem 
of one day. It would pay an adjuster to be slow if it 
was the other rule. I fail to find wherein the great dif- 
ficulty lies outside of the proposition of the central 
point, but the great trouble always arises that specials 
themselves, in their charges and loss adjustments, do 
not seem to appreciate the work. Do not seem to know 
how to appreciate it. 

Mr. Folger — Mr. President, if they cut that per diem 
out of the rule altogether, and arrange for a charge from 
the point to which the adjuster was sent to the place of 
the fire, it would work to much greater advantage. I 
have nothing to say about the matter. 

Mr. H. M. Grant — It seems to me that the matter of 
compensation rests wholly with the company. Whether 
it is $15 or $20 a day, it is the manager that has to pay 
it. If a manager employs me to adjust a loss, and I 
charge him $15 or $20, and he is not pleased, he does 
not pay it again, and I do not work for him; and it 
seems to me that is a matter that would adjust itself 
through the companies; but this matter of charging a 
per diem that you don't earn, does not seem to be right. 
If I am in Fresno, and asked to go up to Bakersfield, I 
do not know why I should charge for returning to San 
Francisco if I am not coming back. With the com- 
panies it is simply a business advantage — not a mean 
advantage, as Col. Rhine suggests. We find the ad- 
juster there. Why should we employ him there? Be- 
cause it is less expensive than to send a man from San 
Francisco. A mean advantage, of course, in two com- 



FIRE UNDERWRITERS' ASSOCIATION. 79 

panies on the same loss; one sends an adjuster from 
here, and the other picks him up down there, and has 
no traveling expenses — that is a mean advantage. But 
it seems to me there is a proper advantage to be taken 
in picking up an adjuster at any point on the line, and 
allowing him to charge his expenses back to where he teas 
taken up. That would seem to be the limit of the expense 
that we may charge. As to per diem, you would have 
to pay as an adjuster sees fit to charge, $15 or $20. 

Mr. Driffield — I think there is very little question, 
or can be very little, regarding the amount of per diem 
as charged by the adjusters. That is, the $15 on one loss or 
the $20 on the two or more. The whole question seems 
to be as to contribution — the proportion that we should 
charge of traveling expenses and the per diem while we are 
traveling, when diverted from a certain point on a special 
trip. Now, I think that is the question. It seems to me 
that it entirely rests with the managers. Speaking as 
one not interested in the adjustment fees, as I be- 
lieve the majority are not, otherwise than in the 
matter of per diems, I think it is a question entirely for 
the managers. But there is something to be considered, 
I think, in the nature of an obligation on the part of the 
person employing the adjuster, not to the adjuster, but 
to his company, when the special is so diverted. We 
all know very well that the special cannot do the same 
good, hard work on the road when he is constantly di- 
verted from his route; when he has laid out a trip for 
himself and expects to be at a certain point at a certain 
time, and has made his arrangements ahead. I know 
that on my last trip I started from San Francisco to be 
gone but a short time, but I was away about six months, 
and the reason I was absent so long was almost entirely 
due to the fact of adjustments coming up at different 



80 FIFTEENTH ANNUAL MEETING OF THE 

times, and I know that our office, charging even as we 
did under the present rules of the Association, were 
not properly compensated for my diversion from 
the regular route of travel. I should have been 
occupied in the drumming up of business, inspec- 
tion of agencies and of risks; all th&t had to go; 
that all had -to be put aside to attend to adjust- 
ments, not only where we were ourselves concerned, but 
in many cases outside. I think it is purely a matter of 
arrangement between one manager and another. The 
per diem charge of $20 a day is little enough to charge. 
Any man who has had the experience that is sufficient 
to enable him to properly appreciate a loss in all its 
bearings, and to properly adjust it, give it the attention 
and the brain work that it requires, is worth $20 a day. 
The other question, I think, is entirely a matter of ar- 
rangement between the different offices. 

Mr. Kinne — Mr. Driffield, it seems to me, has got 
closer to the true business than any of the rest that have 
spoken. We have indulged in a little bit of pleasantry 
which was personal, and I have had my amusement, and 
brother Edwards has had lots of fun, but laying aside 
that matter, and coming down to what is practical, the 
remarks of Mr. Wetzlar regarding compensation, and 
Mr. Driffield as to why a company should not be expected 
to lose the services of a good practical special in the 
field, when occasion offered, are just the key notes of the 
whole proposition, and let me say right here, that this is 
no idea of mine. I happened to be President of this 
Association when you gentlemen who were then members 
adopted it, and it was then the correct thing. 1 
don't know but what we ought to make new Gei 
tral points. I think Mr. Driffield has struck the nai 
on the head when he says what he has. That, if I fl 



= 



FIRE UNDERWRITERS' ASSOCIATION. 81 

down and ask George Spencer if he will loan me the ser- 
vices of Mr. Edwards, who happens to be at a certain 
point, and I am not willing to contribute with the ex- 
pense that landed him there, he has a perfect right — in 
my opinion he would be a foolish manager if he did not 
say, "Well, no, Mr. Edwards is busy, take Mr. Sexton." 
But as soon as you make it an inducement; as soon as 
you show us that there is a mutuality of interest; as 
soon as you can understand that it is a question 
of bringing some good into the business, of utilizing the 
service of some one else and paying for it like a man, 
then it will be be to-day as it has been in the past. 
When we can without being shame-faced, go to the office 
of a brother in the business and say, " I would like the 
services of Mr. Driffield, " or of Mr. Grant, or any one 
else that it may be, whose services may be needed at 
that town. I never have yet found that a single com- 
pany was not willing to pay the share that is contem- 
plated by the rules. For instance: instead of sending Mr. 
Sprowlto Fresno, knowing that Mr. Grant is there, I will 
ask his office to permit us to use him for the day to settle 
a certain loss, but I don't want simply to pay for that day. 
You landed him at that point at your expense. I will 
help bear it and that will be less for us, that will cost 
less when speaking of the financial part of the situation, 
than to send Mr. Wetzlar, or Mr. Sprowl, our own special, 
who might be in town, or anybody else. It is a plain, 
fair and square proposition it seems to me, and some 
reason why it should be abrogated should be shown to 
us before desiring to make a change in a single word of 
the resolution. The only thing is that just as fast 
as we can avail ourselves of intelligent gentle- 
men at a certain point, where companies have their 
special agents for that district, as Los Angeles has 



82 FIFTEENTH ANNUAL MEETING OF THE 

to-day, and Portland and these other places, there is a 
matter of detail to be considered independently as soon 
as the time arrives for it, but as a natural corollary to 
this proposition, we found it necessary to add the fur- 
ther resolution that local agents should not receive these 
figures; should not get the results of what had 
been arrived at. You cannot employ the adjuster that 
I had sent there unless the company whose local agent 
he was, should contribute towards the expense of getting 
that adjuster on the ground. That was a natural corol- 
lary of this resolution when it was adopted. If you 
make any change in the subject matter of these little 
details, then you have got to wipe out the other. Where 
you send a practical, experienced, honest, capable ad- 
juster, whether he be the special agent of another com- 
pany, or an independent, professional adjuster, pay him 
for his services, and don't be afraid of contributing 
your share towards getting him to that point. I don't 
feel like saying anything more, because you all under- 
stand what I am driving at in the matter. It makes no 
difference to my company what is done, because pr< - 
ably insurance premiums will come in, and losses will 
occur, and will be taken care of in a sensible way, by a 
crude process perhaps, but satisfactory at least, and so 
it don't make any difference, but it seems this Associa- 
tion is the embodiment of this feature of settling losses; 
it is the connecting link between the agent and the 
manager, to see to details of this kind. 

I trust before any resolution is offered to make any 
change in the present regulations regarding per diem-. 
or the method of computing the apportionment of the 
expense — different expenses — that some one will give 
some reason why it should be changed by showing some 
individual case where it has worked a hardship to any 
person. 



FIRE UNDERWRITERS' ASSOCIATION. 83 

Mr. Watt — I have been very much interested in this 
discussion this afternoon. I myself do not consider the 
question of per diem an important one. I have heard 
very little complaint about it. There is, however, a 
great deal of dissatisfaction in reference to the appor- 
tionment of the charges from some central points. Mr. 
Driffield made a point on the matter of using 
another man's special agent, and yet it ought to be 
considered that you have no call on that man's ser- 
vices; and if his principal does not want him to be used 
that way, he need not be so used. It is rather patent 
on its face that if a man allows a special agent to do that 
kind of work, he is willing to have him do it; it 
is not ahvays done as a matter of accommoda- 
tion. I don't know what the average salary of 
special agents may be, perhaps three, or four, or 
five hundred dollars a month, something of that 
kind, but if he is given $20 a day that comes up to 
this sum and more too, and I suppose it is a rec- 
ognized fact that the oftener you can drop in up- 
on the local agent, the more influence you can have over 
him, and therefore if you are diverted even four or five 
times a year it w r ould seem that you w r ould have an oppor- 
tunity of meeting and talking to your agent without any 
expenses to your company whatever; therefore, there 
is a gain to your company in that particular. I think 
the principal difficulty in the way, the principal difficulty 
with the present rule is that " central point " idea. If a 
man is, as Mr. Sexton was a few days ago, for instance 
in Spokane Falls, and is diverted to a town close by 
Spokane, it seems to me like robbery to charge time 
and expenses from Portland to Spokane and back to 
Portland, when he did not intend to go there at all, or 
have to go there. It is just like, as Mr. Edwards well 



84 , FIFTEENTH ANNUAL MEETING OF THE 

says, putting your hand in the company's pocket and 
taking so much money which you don't earn, and 
have no right to. I believe the rule ought to be so 
changed that when the special agent is diverted from 
a place, that he could charge from that place to the loss, 
at the loss and return. I like Mr. Sexton's idea as set 
forth in his letter in reference to charges and appor- 
tionments very much. I do not believe in changing 
the per diem. 

Mr. Driffield — In relation to Mr. Watt's assertion that 
because a company is willing that its special agent should 
be utilized by some other company at a certain point 
fully establishes the fact that that company wishes to 
gain by the compensation the special agent has made, 
and does not act through courtesy in any way, I think 
he is entirely wrong, and I think there are very few of- 
fices on the street to-day who are willing their special 
agents, or adjusters, should be used merely for the money 
they have earned on behalf of the company. I think 
that, in all cases, where a special agent is used, that it 
is a matter of courtesy pure and simple; because I know 
the majority of companies do not like their men to be 
diverted from points where they have been sent. 

Mr. Watt — I want to say one word, which I forgot 
when I was up. It is a strange thing to me, that in the 
course of our meetings for the last seven or eight years 
there has not been a single meeting where the young 
man starting in business has not received a slap in the 
face in reference to his inability, and that he ought to 
be getting $1.50 a day; and yet we have all had to make 
a start at some time or other, and there is a courtesj 
not only in fact but in sentiment and in expression 
which ought to be extended to the young men on 



FIRE UNDERWRITERS' ASSOCIATION. 85 

this floor. I do not believe that we ought to say these 
things which must necessarily make the young man who 
is just beginning this business feel so uncomfortable 
as he must under these remarks. 

The President — Now, gentlemen, we have talked this 
matter over for nearly an hour, and have arrived at no 
definite conclusion, and it remains for you to say now 
what you desire to do. Shall we postpone this discus- 
sion until to-morrow, and take it up again, or do you 
prefer to continue the discussion and take up Mr. Sex- 
ton's recommendations seriatically and pass on his 
recommendations as they come up. 

Mr. Kinne — There is no question before the house 
now. 

Mr. Watt — I was simply going to move for the pur- 
pose of bringing it up, that that portion of Mr. Sexton's 
communication which relates to the apportionment of 
traveling expenses be adopted by the Association as the 
rule hereafter, omitting the first part in reference to the 
per diem of $15, or $20 as a minimum. 

The President — Mr. Watt has made that motion which 
you have heard, is there a second. 

Mr. Kinne — I second the motion, to bring it before 
you. 

Mr. Wilson — I move that the motion be laid on the 
table. 

The President — It is moved and seconded that the 
motion be laid on the table, all in favor of that motion 
will signify by saying aye. Contrary, no. 

The chairman is unable to decide. We will have to 
change this vote to a rising vote. Air in favor of the 
motion to table will signify by rising. 
6 



86 FIFTEENTH ANNUAL MEETING OF THE 

The President — (After counting.) Fourteen votes. 
(Not counting the secretary, who wished to be recorded 
as voting in the affirmative.) 

The President — The contrary will please rise. 
(After counting.) Nine votes. 

President's decision — The motion of Mr. Watt is laid 
upon the table. 

Mr. Wilson — I move we adjourn. 

The President — Of course you understand that under 
that resolution, the question can be called up again to- 
morrow. 

Mr. Cofran — I shall rise to a point of order. When 
you table a motion in relation to a point of the propo- 
sition, it lays the whole proposition on the table. 

The President — Unless the motion is to table for a 
definite time, the motion to table is only for the day. I 
shall overrule the point of order. I think it can be 
again taken up during the session, but not on the same 
day. It can be taken from the table. 

Mr. Wilson — I move we adjourn. 

The President — There is a motion before the house 
that we adjourn until what hour? 

Mr. Wetzlar — Ten o'clock to-morrow. 

The Association then adjourned. 



FIRE UNDERWRITERS' ASSOCIATION. 87 

SECOND DAY. 

February 18, 1891. 
The President — The meeting will please come to order. 
I presume that on account of business matters some of 
the members have not been able to get here as promptly 
this morning as I would have liked to have had 
them gotten around, but as we have a great many 
papers for the day, and a great deal of work to dispose 
of, I think we better come to order and get to work. As 
Mr. Wetzlar has not got around yet with his paper, I 
will call first on Mr. Ives to read his paper on " Now and 
Then." 

Mr. Ives — (Reading). 

NOW AND THEN. 

Mr. President and Gentlemen — Many years ago at a time now known 
as "good old days," the insurance business of the United States was con- 
ducted by sedate gentlemen in wigs, knee-breeches and other things, who, 
notwithstanding the fact that they took applications and actually enforced 
most of the terms and conditions of their policies, did quite an extensive 
business, and by working a few hours each day made enough money to 
satisfy their own frugal wants,, and often paid dividends to their stock- 
holders beside. In those days there were few local agents, no special 
agents, and the voice of the broker was not heard in the land, or if it was, 
he sang exceeding small. Since then the business has grown enormously, 
suffered many changes, and suffered by changes, until according to the 
prophets and elders of the fraternity, it is now in a bad way, a very bad 
way indeed. 

Distinguished gentlemen who are deeply versed in insurance lore show 
us by intricate columns of figures and by ingeniously constructed charts, 
that the insurance business of this great country is hastening blindly 
downward to destruction. They tell us that rates are getting lower; that 
incendiarism is more prevalent; that salvages are less; that the proportion 
of insurance to value is decreasing, and that commissions and expenses 
are growing larger. They tell us, in fact, that the profit from underwrit- 
ing is diminishing generally in a most alarming manner. 

These same gentlemen also tell us the average interest on investment 
is visibly shrinking. This last difficulty, however, does not apply to all 
insurance companies alike, as some of them find it expedient to use their 
entire income in paying losses and expenses, and occasionally dividends, 



OO FIFTEENTH ANNUAL MEETING OF THE 

thus avoiding the petty annoyances and anxieties which always follow the 
possession of great wealth. 

With these portentious views of the insurance business thrust upon us 
(some inherit them) we are often asked to pause and consider our great 
extremity, to look at the fate to which we are so swiftly hastening. We 
do consider these questions, and about this season of the year when we 
are naturally burdened and bowed down with good resolves, such trains 
of thought would be really depressing were it not for those cheerful 
annual statements that now come to us from most of the companies. 
From those statements, as glowing and almost as numerous as tinted 
leaves in Autumn, we take heart again, and feel that perhaps the utter 
ruin of our business is not so near as we had been led to infer it was. 
We know, of course, that the threatening evils so briefly referred to, ap- 
ply to the average of the entire insurance business, rather than to individual 
insurance companies, but even then, those rose-tinted statements of the 
companies might reasonably lead us to think some of the acknowledged 
leaders of our business are perhaps a little like that hard headed old 
Scotch geologist who, when told that certain strata of rock did not agree 
with the geological theories, replied, " if the rocks do not agree with the 
theories it is all the worse for the rocks." But, admitting as we must, 
certain growing and perhaps threatening evils in the insurance business 
of the country at large, we of the Pacific Coast are certainly entitled 
to complain if anyone is, as we have, in addition to these general troubles, 
many local ones of our own to meet. We are apparently between the 
devil of demoralization on the one hand and the deep sea of legislation on 
the other. Within our own ranks fierce competition for business leads to 
" tricks that are vain; " city brokers evidently hypnotize many who have 
large lines of insurance to place; country agents are injudiciously multi- 
plied; credits are unduly extended; inexperienced solicitors ravage the 
land, and — we all admit the evil thereof, and — say it ought to be stopped. 

Aside from the internal troubles of our corporate bodies, we are assailed 
by the press (when it is not more profitably engaged); misunderstood by a 
public which looks upon fire insurance as it does upon taxes, as a sort of 
foreordained and unavoidable scheme for grinding the face of the poor; 
oppressed by legislators who, whatever else they may be, are always 
"agin us," and who consume gallons of midnight oil (and other liquids) 
in devising ways and means to make us pay more tribute to the State, 
to Caesar, or to somebody. 

These are only a few of the many local difficulties we of the Pacific 
Coast have to contend with, but they are sufficient to show that if the 
insurance business is deteriorating generally, as we are told it is, it 
must certainly be in a bad way here. 

Ye "Patriarch" of the Monitor has often told us in his clear and 
practical way how some of these evils could be modified and perhaps en- 
tirely obviated if the companies would only work together for such 



FIRE UNDERWRITERS' ASSOCIATION. 89 

reform. But that question of all working together is the nimble flea of 
the whole business, and will probably never be caught. We all know how 
easily the insurance business might be improved — if it were not for the 
other fellows — and some of us perhaps fear it may be. Among the gen- 
tlemen, especially the "road agents " now before me, there may be some 
who when calmly sleeping (as only a special agent can) among the broken 
springs of a pulu bed in the only first-class hotel of some country town 
may have dreamed of the time when insurance companies should be 
licensed, taxed and supervised by the general government only; when 
rates should be based upon the combined experience of all the companies, 
and made to follow the hazard without fear or favor; when suitable 
building laws should be enforced; when insurance agents should be en- 
gaged in no other business, and their number should be limited in propor- 
tion to the number of inhabitants in their city, town, or district; when 
the origin of all fires should be closely investigated by the State; when a 
three-quarter or other per cent, co-insurance and loss clause should be a 
part of each policy; when the mortgagee's interest should be recognized 
simply by loss, if any, payable to John Doe; and when no policy should 
be delivered or in force until the premium was actually paid. If any of 
you gentlemen ever have had such dreams, by the time your mind had 
■evolved all these changes from your inner consciousness (as the German 
professor revolved the camel) you probably became so restless and excited 
that the broken springs seemed to crawl beneath you, the night air filter- 
ing through the worn coverlids seemed to enfold you like the waters of 
oblivion, and you doubtless awoke and found all the waste places of your 
mind filled with a dreadful fear that the dream was real, and that, as 
the natural result of all these reforms in the business, field men would no 
longer be required, and you would therefore be deprived of all those 
peculiar physical comforts that render the special agent's life a happy one. 

Perhaps some of the changes outlined in this dream may sometime be- 
come established facts, but if they do, it will be long after most of us 
nave " crossed the divide," and even then they can only be fully realized 
when human nature changes or when — Johnny gets his gun. 

I presume our knickerbockered predecessors of fifty to one hundred 
years ago thought the insurance business was then in a bad way, and they 
probably looked backward to "good old days," as we do now — days that 
then, and always seem to have existed and passed silently away long be- 
fore the advantages they offered were fully recognized. So, too, if those 
who come after us should find the present evils of the insurance business 
had passed with the age that gave them birth, they, in turn, will have 
other, and perhaps greater difficulties to contend with, and may wish for 
the good old days in which we now live. 

Memory softens the past and hope gilds the future, but the present lies 
"ust before us under a clear, cold light which often seems to magnify the 
obstructions in our way. 



90 FIFTEENTH ANNUAL MEETING OF THE 

Let ns, therefore, seek to correctly gauge the evils of our business. 
They can never be entirely removed, but they are not so very bad after all, 
and will seem still les.3 if we all respect the rights of others and are true 
to ourselves. 

As far as the press and the public are concerned, they possess in a high 
degree that little knowledge of our business which is a dangerous thing. 
Such of our troubles as arise from this source are largely owing to the 
glowing and somewhat misleading statement made by the companies, and 
might be readily modified by stating only the actual facts of our bus- 
iness, and by paying the press to educate the people, thus teaching both 
that our interests are mutual, that each is dependent upon the other. 

Nor need the field man lose any sleep through fear of being obliged to 
work for a living in some other business, for it will be a long time yet be- 
fore "insurance made easy" will enable the companies to dispense with 
inspection, selection and protection; before they can allow the public to 
make rates, and agents to name commission, or before they can adjust losses 
by correspondence. 

STEPHEN D. IVES. 

(Followed by applause.) 

The President — Gentlemen, Mr. Ives' paper gives me 
a great deal of comfort as it sort of convinces me that 
our troubles are no troubles after all, but that what we 
have been considering troubles, has all been in our im- 
agination. That the worry we have taken day after 
day was entirely unnecessary, and we are always grate- 
ful for any paper that is a comfort to us. And now, as 
the delinquent member has come to hand, Mr. Wetzlar, 
we will call on him to present his paper. I am a little 
surprised that one who is ordinarily so prompt should 
have been behind time this morning. 

Mr. Wetzlar — Mr. President, my only excuse for being 
late is that of business. I have been unavoidably de- 
tained. Gentlemen, as the paper I have prepared is 
quite lengthy and bristles with legal authorities and 
references to books of authority, I will, in reading it, in 
order not to worry the members, leave out the author- 
ities, and we can glance at them afterwards when we see 
them in print. The title of my paper is " Adjusters 
and Appraisers." 



FIRE UNDERWRITERS 7 ASSOCIATION. 91 

ADJUSTERS AND APPRAISERS. 

Mr. President and Gentlemen — When I promised our good President 
to prepare for this annual meeting a paper, and selected for a topic " The 
Adjusters and Appraisers," I must confess I did not realize the labors I 
would have to perform in the fulfillment of the promise so freely given. I 
felt satisfied I could easily dash it off, and flattered myself that the topic 
would take up but little of my time. Suffice it to say, that the deeper I 
dipped into the subject the more I found I would have to leave unsaid, 
and the paper I have prepared is the result of such labor and research. I 
shall attempt to present to you the position and duties of Adjusters and 
Appraisers, from a standpoint practical as well as theoretical; at the same 
time giving you a collaboration of authorities upon various matters, ap- 
propriating and compiling for this purpose with piratical hands freely from 
the works of our most eminent insurance writers, and I feel that the labor 
of compiling alone amply repays me. 

Whilst almost every writer upon the subject of Adjusters "starts in with 
the premise that adjusters are born and not made, I will premise by say- 
ing that a strong will, a patient temper, and sound common sense when 
united with good business qualifications and the proper education, hon- 
esty of purpose, a well-balanced mind and good moral character, con- 
stitute, when united in one individual, excellent qualities for an adjuster; 
and he who starts out with these qualities and the determination to reach 
a desired end, generally does reach it. 

That adjusting is an art, I will take issue with; that it is a scientific 
profession, goes without the saying; that the same application and study 
which go to make the successful lawyer, doctor or preacher, is necessary 
to the student in underwriting to become a successful adjuster. In addi- 
tion to these qualifications the adjuster's profession requires the honesty 
of a Quaker, the genius of a Pinkerton, and the patience of a Job. It is 
advisable to go around obstacles that one might break his neck over in 
attempting to leap. Policy is as necessary to success in most cases as 
energy, and adjusters who have the ability, and the will to further their 
efforts, learn to work perseveringly towards the object without being dis- 
couraged by the rude jostlings or obstacles they might encounter. 

An adjuster is expected to possess a fair knowledge of everything. He 
should be more familiar with pork-packing than a Chicago millionaire; a 
greater dry goods sharp than Farwell; gentle as a dove, wise as an owl, 
firm as a rock, and deep as a politician. He should be a good detective, 
like Vidocque, plausible as Parnell, and as suspicious as a Democrat. He 
should know the prices of goods from the mainspring of a watch and a 
yard of muslin to a combined harvester. He should know how many dis- 
counts there are obtainable in the purchase of any quality of goods; and 
when he has burdened his oftentimes weary brain with price lists galore; 
has read law and hunted up authorities like a follower of Coke and Black- 



92 FIFTEENTH ANNUAL MEETING OF THE 

stone, is pronounced by the mercantile community the most accomplished 
expert accountant — declared generally a hale and hearty good fellow — he 
may possibly be able to make the immense salarj 7 of six thousand dollars 
per annum. I say may be able to make, for, speaking professionally, this 
would mean legitimate per diem charges. A dishonest adjuster, and 
thank God, there are but few of them, could easily make ten times as 
much. 

Yet how rare is it that cases of dishonesty in this profession ever occur, 
and it is but a just tribute to the profession that their greatest qualifica- 
tion is that of unimpeachable integrity. 

There are two classes of adjusters: the special, who is attached to and 
serves one company, and the professional or independent adjuster, who at 
times serves them all — to whom cases are sent and referred in the same 
manner as the manager would refer to his attorney other questions of 
import. 

It is the adjuster's business after a loss has been placed in his hands to 
get upon the ground as soon as possible. This, oftentimes, is a great 
advantage, as it enables a shrewd observer to carefully note such things as 
may appear identifiable in the debris, such as iron castors of furniture, 
locks and hinges, butts, springs, musical instruments (like jrianos), 
marbles, billiard and pool tables, large mirrors, crockery, glassware and 
cutlery, and the many thousand and one things that even after passing 
through a fire leave some remnant whereby, by close scrutiny, they can be 
identified. Oftentimes, also, an earl} 7 presence upon the scene enables 
an adjuster to receive valuable information from parties conversant with 
the cause or origin of the fire and prevents the meddlesome interference 
by outsiders, who, seeking to make a fee, like birds of prey, fasten upon 
the gullible claimant, for the purpose of obtaining from him a fee for pre- 
tended knowledge and assistance they aught could render him in the 
determination and adjusting of his loss. These fiends, like the gaula 
who follow armies to battle and there rob the dead and dying, have no 
hesitancy many times to perpetrate, or attempt to perpetrate, the most 
outrageous of claims and compound felony upon felony. Their attempts 
at deceit, fraud and extortion, if not properly met and checked fearlessly 
by honest adjusters, grow bolder and bolder as the fees they have received 
correspondingly fill their rapacious pockets. When failing to be employed 
in the capacity of advisers, they then seek to foist themselves into the 
position of appraisers for the claimant, and it 'at once becomes apparent 
that the shrewd and careful adjuster should always examine the proposed 
appraiser before permitting him to qualify regarding what conversation, 
examinations and estimations of value of the property claimed to b< 
stroyed he has made, and how much of such knowledge as obtained by 
him he has already communicated to the claimant. 

These questions should be asked the appraiser immediately succeeding 



FIRE UNDERWRITERS' ASSOCIATION. 93 

the same questions having been asked claimant privately before interview- 
ing the appraiser; and, by a mental comparison, a pretty close guess can 
be made by the adjuster as to the truth of this information. Should the 
suspicion be strong enough to warrant the fact, the absolute rejection of 
the appraiser should be made on the grounds of ineligibility as will more 
particularly appear in the qualifications of appraisers. 

Another class of claimants, and, frequently, their attorneys, have the 
habit of attempting to bulldoze the adjuster by threatening to sue the 
company and involve it in litigation. Thejr do this on the well known 
hypothesis that insurance companies dislike lawsuits and pay claims that 
they believe to be fraudulent sometimes rather than fight and have people 
think that they object to reasonable demands. There are people in this 
world, and unfortunately many of them, who would not cheat anybody 
but an insurance comjDany, and, I am afraid, they have the belief that it 
is no sin to rob insurance corporations. The old adage of : " Believe every 
man to be dishonest until you know him to be honest," is a hard one, 
but, nevertheless, surely exemplified in most large claims. Fori believe? 
and in fact it has been my experience, that even a minister of the gospel 
has tried to cheat and rob an insurance company by the presentation of a 
fraudulent claim. 

The proportion of incendiary fires is excessively large, and not, as most 
people think, exaggerated by insurance companies; but on the contrary, 
over sixty-five per cent, of the origin of fires can be traced to incendiar- 
ism. It is not aways the individual who applies the lighted torch that is 
alone to be classed as incendiary, but the party, who, with malice afore- 
thought, distributes matches, volatile or gaseous substances into such a 
position on premises where, by the action or heat, light or air, the con- 
trolling influences of moving positions, or of contact with other sub- 
stances, will create the necessaiy friction or ignition, these are the most 
skillful and dangerous elements of the criminal class that more times 
escape the due process of law and mingle with the more educated and well 
to do class of the community, which, to unearth, run down, ferret out, 
unfathom and convict, is a thousand fold more credit to the skill of an 
adjuster than the more simple conviction of an individual of the ignorant 
and brutal class. In the conviction of the former class of incendiaries, 
knowledge of chemistry and of the liability to heat of various substances 
is most essential. Electricity and electrical applicances, also will in the 
future play a great part in the origin of fires; and the coming and future 
adjuster should be a fair electrician. The study is an interesting one, re- 
quiring but small outlay, and infinite in its application. An adjuster 
should know all the conditions and limitations of the policy which he 
may be called upon to adjust a loss under. He should absolutely know 
all the things that render a policy void. All these qualifications are essen- 
tial to cope successfully with the frequently shrewd and dishonest claim- 



94 FIFTEENTH ANNUAL MEETING OF THE 

ants bent upon fleecing insurance corporations. Courage and discrimina- 
tion, experience and sound judgment and decision of character are grand 
qualifications in an adjuster. Patience and perseverance in the discharge 
of what may at times be unpleasant labor should always be his watchword, 
as the exhibition of anger or harshness tends oftentimes to the injury of a 
case, whilst an unreasonable man will frequently yield to words fitly 
spoken, and to the proper exercise of this gift, in a great measure, is due 
the success of the adjuster. A man should have a natural aptitude for 
the profession, and the theoretical as well as the practical knowledge of 
fire underwriting will enable an adjuster to cope much more readily with 
complicated cases as he would be enabled to present and master them 
more quickly. An adjuster should be fearless in the honest discharge 
of his duties, for he cannot always fail to give offense. Some of 
the most astute business men frequently call an adjuster exacting 
when in the investigation of a loss he simply calls for and in- 
sists upon vouchers that would naturally pass between merchants in 
the ordinary settlement of business affairs, for the purpose of establishing 
and ascertaining beyond peradventure, ths amount of the claim payable by 
the company; that in most instances the adjuster is obliged to depend 
upon the honesty of the claimant and not producible evidence is also 
one of the hardships of the profession, which depends upon the adjuster's 
careful study of human nature and plrrsiognorny. Adjusters should 
recollect that insurance means indemnity, that all honest losses should be 
settled upon the basis of justice. The rights of both company and claim- 
ant should be sacredly observed, and the rules of equity should obtain re- 
gardless of how the insurance involved will be affected thereby. The 
reputation of the company, and the integrity of the adjuster should be 
conscientiously maintained under all circumstances whether the loss be 
total or partial. The duty of the adjuster is to ascertain the actual loss 
sustained by the company, the cause and origin of the fire and the lia- 
bility of the insurance company under the contract of insurance. He 
should then award the amount of loss, if within the insurance, regardless 
of the question of salvage which should always be allowed to take care of 
itself and never be the object of adjustment. As the assured pays for in- 
demnity to the extent of the given amount insured, he should be fully 
indemnified. This, as I said before, is the contract, spirit, and object of 
insurance. For this purpose the adjuster should know that any omission, 
misrepresentation, or non-disclosure, or concealment, or withholding of a 
material fact as to the title, incumbrance, condition, location or occu- 
pancy of the property; or if the construction stands on leased ground; or 
if there is other insurance without notice; or the premises be vacant or 
unoccupied; or if the risk is to be increased or changed in any manner: or 
if it is a manufactory running on extra time, or at night; or if it become^ 
idle, or ceases to be operated, or no watchman is kept on the premises, 



FIRE UNDERWRITERS' ASSOCIATION. 95 

or an}' change or alteration takes place in the title, excepting by the 
death of the assured, incumbrance, condition, location, occupancy 
or possession, whether by legal process or voluntary transfer, or if 
the policy be assigned before a fire, or if the statement of a claim be not 
furnished within the days required by the policy, unless otherwise stip- 
ulated, the policy ceases and determines. He should know that the 
policy does not cover all the various articles as enumerated in the condi- 
tions unless particularly endorsed in writing upon the policy; that, for 
instance, companies are not liable for money, bullion, notes, accounts, 
deeds or securities of any kind, nor damage by fire caused directly or in- 
directly by commotion, riot, mob, strikes, military powers, civil wars, in- 
vasions, insurrections, violations of, and resistance to, or deviation from 
the laws. Nor by explosions of any kind, or orders of civil or military 
authorities, nor lightning or heat, unless fire ensues; or if the building 
falls, unless fire ensues, and then for the damage by fire only; that, unless 
specifically mentioned, policies do not cover and companies are not liable 
for loss and damage to musical instruments except in dwellings, jewelry, 
silver and plated ware, ornaments, metals, patterns, music, books, manu- 
scripts, engravings, paintings, or their frames, sculpture, casts, models, 
fresco work or gilding on the walls or ceilings, fixtures, plate glass 
or mirrors beyond certain dimensions, goods held in storage or in 
trust or on commission, unless specially mentioned and then not ex- 
ceeding actual net cash cost of the same. That no liability of the com- 
pany exists, under and by virtue of the policy for loss and damage caused 
by the working of mechanics except in dwellings where fifteen days a year 
are allowed, or by the generating of substances for burning gas, or the 
keeping, using or storing of gunpowder, fire works, Greekfires, nitro- 
glycerine, giantpowder, phosphorus, varnish, naphtha, gasoline, ben- 
zine, or any other volatile oil or explosive article kept on or in the prem- 
ises described, any customary usage of trade to the contrary notwith- 
standing — unless permission is endorsed on the policy; that certain quan- 
tities of kerosene oil, and gunpowder, only may be carried in general 
merchandise stores, and that, as a rule, gunpowder must be kept in tin 
cannisters near the doors; that the company is not liable for theft at or 
after a fire, or for any damage caused by any abandonment by the neglect 
or failure of the assured to use his best endeavors in saving and protect- 
ing the property insured, either before, at or after a fire. Nor is any com- 
pany liable for any consequential or constructive damage whatsoever. An 
adjuster should know that the company he represents is not liable for any 
greater proportion of the ascertained damage to property insured under 
his policy than what the specific amounts of his policy bear to the total 
of the specific amount of insurance covering thereon, whether the other 
policies or agreements for insurance covering on the said property are 
valid or invalid. This also is the case with contracts whereby the assured 
is a co-insurer. 



96 FIFTEENTH ANNUAL MEETING OF THE 

An adjuster should know that any person who has procured the insur- 
ance for the claimant unless he be a person duly commissioned and law- 
fully authorized as an agent for the company, is, under the conditions of 
the policy, designated and known and declared to be the agent of the as- 
sured, and that the companies are not liable for any agreements made 
excepting such as are endorsed, signed and dated in writing on the policy. 
He should know that a policy covering a building which stands on leased 
ground is void unless endorsed to that effect upon the policy: 
Mers vs. Franklin Insurance Company. 68 Mo., 127. 
Ross vs. Citizens Insurance Company, 3d Pugsley k B. (N. B.), 126. 
He should know that store furniture and fixtures are not covered by a 
policy on a building but ma}' be specifically insured; that furniture and 
movables are chattels, not fixtures, and are not covered by a policy on 
fixtures. 

Bents and profits on sales of goods are not covered by policy unless 
specifically insured : 

Ellis on Insurance, 49. 

Flanders on Insurance, 90. 

May on Insurance, 86, 639, 646. 

Leonard vs. Phoenix Assurance Co., 2d Bobb, la., 131. 

Menzies vs. N. B. Insurance Company, 9 C. C. (S. C), 694. 

Niblo vs. North American Insurance Co., 1st Sandford, New York, 

551. 
Sun Fire Office vs. Wright, 3 Nev. and Man., 819. • 
Putnam vs. Mercantile Insurance Co., 5 Met., 391, 
McCarty vs. Commercial Co., 17 La. An., 365 (3 Ben. F. I. C, 60). 
No condition of a fire insurance policy is waived excepting by endorse- 
ment on the policy, and cannot be waived in any other manner: 
Gladding vs. Insurance Company, Cal. S. C, Nov. 2, 1884. 
No loss occasioned by the internal defects of anything insured should 
fall upon the insured. 

Flanders on Insurance, 551. 

Brunner vs. Liverpool, London and Globe, 51 Cal., 151. 

Fireman's Fund Insurance Company vs. Congb'nay, Sholan, 80 

Ills., 558. 
Lews vs. Spring. F. <fc M. Ins. Co., 10 Gray (Mass.), 159. 
Mave vs. Home Mutual Insurance. Company, 37 Mo., 431; 5 Ben. F. 
I. C, 88. 
He should know that the net cash value of the property destroyed or 
damaged should in no case exceed what it would have cost the assured 
immediately preceding the fire to have produced or replaced the same; 
and any case of depreciation of such property prior to a fire from use, 
location, occupancy, or otherwise, should be fully established; and a 
suitable deduction from the cash cost of producing or replacing should be 






FIRE UNDERWRITERS' ASSOCIATION. 97 

made to ascertain the actual net cash value of said property. He should 
know that it is optional with the company to take the whole or any part 
of personal property specified at its appraised value, and that the company 
has the right, if it wishes to exercise it, to repair, rebuild, or replace any 
property burned or damaged with other of a like kind and quality within 
reasonable time, giving notice of their intention so to do within sixty 
days after verified claims have been received. Insurers are answerable 
only for direct and immediate loss, and not for consequential or remote 
damages. The instrument of destruction must be fire, or resulting from 
fire. Therefore, where goods and the house containing the same, were 
not touched by fire, but the goods were damaged by the removal of them 
under reasonable apprehension that the premises would be destroj^ed, it is 
held that the injury sustained by the assured in such removal is covered 
only pro rata with the assured by the companies, as insurance bears to 
value if the danger is such that a prudent, yet uninsured man, would not 
let his goods remain in the building threatened, and if the same care is 
exercised by an assured in the removal of the goods, he is entitled to 
recover from the insurer- all damage done in the removal. 

Wood on Insurance, 248. 

Case vs. Hartford Insurance Company, 13 Ills., 676. 

Fireman's Insurance Company vs. May, 20 Ohio, 211. 

Holtzmen vs. Franklin Insurance Company, 4 Cranch., 495. 

Stanley vs. Western Insurance Company, 3 Law Rep., Exch., 71. 

Thomas vs. Montreal Insurance Company, 6 U. Q. B., 319. 

W T itherell vs. Maine Insurance Company, 49 Maine, 200. 
Failure or neglect on the part of the assured, or abandonment of, in sav- 
ing and protecting the property from damage at or after a fire, voids a 
policy. 

Brady vs. N. W. Mc. Co., 11 Mich., 435. 

Case vs. Hartford Ins. Co., 13 Ills., 676. 

Devlin vs. Queen, 46 U. C, Q. B., 611-621. 

Newmark vs. London and Liverpool Insurance Co,, 30 Mo., 160. 

Wood on Insurance, 113-193-218. 

Flanders on Insurance, 538-541. 
Companies, or their duly authorized adjusters, have a right to require 
the insured to produce all books of accounts, vouchers and data apper- 
taining to a loss; to examine under oath respecting their loss all claim- 
ants, and cases of refusal are valid defenses as well as failure to furnish 
when required certificate of a magistrate or notary public. 

De Wees vs. Manhattan Fire Insurance Company, 34. 

N. J. Law, 245. 

35 N. J. Law, 366. 

Jeu vs. Brooklyn Fire Insurance Company, 28 Barber (New York). 
He should know that the offer of a certain sum in settlement by the 



98 FIFTEENTH ANNUAL MEETING OF THE 

adjuster, and its refusal by the insured, constitutes a difference within 
the meaning of the policy. 

Pioneer M'fg Co. vs. Phoenix Ins. Co. 
He should know that a letter embodying the formal request for arbitra- 
tion is sufficient written request; that the refusal of the insured to sign 
the agreement to arbitrate according to the terms of the policy, on the 
grounds that it does not include as finding as to the liability of the com- 
pany, is refusal to arbitrate and justifies denial of the liability conditioned 
on such refusal, and this denial is not a waiver of the company's rights to 
arbitration. He should know that a stipulation for arbitration is not a 
condition precedent, and if not demanded within sixty days and after 
right of action has accrued, it is waived. 

Case vs. M'fg. Co., Cal. C. C, 1889. 
He should know that if either party is aware of the fact at the time of 
entering into submission for appraisal, that either of the arbitrators is 
biased or prejudiced and nevertheless voluntarily binds himself by the 
undertaking, he cannot afterwards make it the basis of an objection. 

Fox vs. Hazelton, 10th Pick., 275. 
He should know that it is perfectly proper to request the arbitrators to 
adjourn to some future time to enable him to introduce further evidence 
if he finds himself surprised at unexpected testimony, or the case set up 
against him. 

Solomon vs. Solomon, 28 L. • J., Exch., 129. 
He should know that when a third arbitrator is called in and he is se- 
lected, all three arbitrators should consult together. 

In re Templeman and Reed, 9 Dowl., 962. 
He should know that an adjuster when simply employed as an adjuster 
has no right to commence criminal proceedings unless authorized by the 
companies, and that the companies will not be bound by such act unless 
authorized or subsequently endorsed by them. 

The Norman Insurance Co., U. S. C. C, Sou. Dist. of Ills., 4th In- 
surance Law Journal. 
He should know that no stipulation as to arbitration can oust the juris- 
diction of a court. 

Scott vs. Phoenix Assurance Co., 1 L. C, 152. 

Gill vs. Hollis, 1 Wilson, 129. 
That a denial of liability is a waiver of the right to arbitration. 

Robinson vs. Insurance Co., supra. 
He should know that only general agents charged with the duty of set- 
tling a loss have the power to dispense with stipulations for the benefit of 
the company as to the mode of ascertaining the liability and limiting the 
right of action. 

Gloucester Mfg. Co. vs. Howard Ins. Co., 5 Gray. 497. 

Kennebec vs. Augusta Ins. Co., 6 Gray. 204. 

Eastern Railroad vs. Relief Ins. Co., 105 Mass., 570. 



FIRE UNDERWRITERS' ASSOCIATION. 99 

And, most important it is for him to know, that the declaration of the 
adjuster showing a determination on the part of the company not to pay, 
renders notice and proof of loss unnecessary. 

Germania Fire Ins. Co. vs. Cast Steel, Ills. S. C, 7th Ins. Law 
Journal, 253. 

The agreement by the insurer with the assured after loss to submit the 
amount thereof to arbitration is a waiver of the objection that proofs of loss 
were not furnished. 

Bammessel vs. Brewers' Fire Ins. Co., Wis. S. C, 43_Wis v 463; 7th 
Ins. Law Journal, 767. 

And a distinct refusal to pay on the grounds that the company is not 
liable, is a waiver of the policy stipulations concerning notice and proofs 
of loss. 

West Rockingham Mutual Fire Ins. Co. vs. Sheets & Co., 26 Gratt., 
854. 

In the ascertainment of losses upon buildings, an adjuster should pro- 
cure from the assured a plan and a description of the arrangement and 
construction of the building destroyed; and then, if unable to agree with 
the claimant as to the amount of such loss and damage, should agree 
upon the plan and specification or disposition of the structure and ar- 
rangement of the said plan, which is to be attached and made a part of 
the submission to appraisers and be a guide to them for the proper ascer- 
tainment of the loss by arbitration. In the same connection the ground 
measurements of the building destroyed should be carefully taken; eleva- 
tions and heights of ceilings and stairs, openings of doors and windows, 
and partitions, stairways, chimneys, awnings, porticos and additions care- 
fully noted; and, in fact, before an appraisement is entered into as between 
claimant and company, the adjuster should have received from the claim- 
ant a carefully detailed description of the construction, arrangement, age 
and condition of the building destroyed. 

Partial losses to merchandise should be settled by mutual agreement 
between the claimant and adjuster, if possible; and, if not, then by arbi- 
tration. No specific rule can be laid down for the various classes of mer- 
chandise; household effects and wearing apparel should be treated in 
about the same manner. 

In case of loss upon personal property other than stocks of merchan- 
dize, if totally destroyed, much tact and careful inquiry will be necessary 
for the proper ascertainment of the details of the items lost. If losses 
be upon property with the value of which the claimant is acquainted, the 
adjuster is generally safe in agreeing with him as to the damage in pre- 
ference to submitting damage to appraisers; for, in many of the smaller 
towns, the very disinterested men selected by the claimants for appraisers 
are perhaps their most personal friends and neighbors for many years, 
and of whose judgment and honesty the adjuster has no actual knowl- 



100 FIFTEENTH ANNUAL MEETING OF THE 

edge. No adjustment on this class of property should be entered into 
without a thorough preparation on all questions that properly come within 
its scope, for the claimant cannot fail to be impressed in your favor by 
the complete mastery and knowledge possessed by you in the details of 
his particular business. If you can prove to him, and convince him, that 
you are master of his trade as well as your own, you have already accom- 
plished a big stride towards the successful termination of your adjust- 
ment, for ignorance or even a limited knowledge of the details of the 
business in question would be humiliating, and you would successively 
fail in convincing the claimant of the justness of your views on other 
questions involved in the loss where your ignorance has been disclosed 
so glaringly. Particularly bills of purchases and duplicates should be 
required w T hen necessary, premises diagrammed, property located in dif- 
ferent rooms, and depreciation in all classes of losses should be determined 
and agreed upon between the claimant and the adjuster. Each loss, how- 
ever, must be adjusted upon its own merits. 

The subject of depreciation or difference between old and new is one 
that gives the average adjuster considerable worry and trouble. It is 
most natural for all persons to think that their property is better than 
their neighbor's, and careful investigation should be had of the various 
ages and uses of the different articles, particularly household effects 
claimed as lost or destroyed. It is unquestionably true that all classes of 
property deteriorate a certain per cent, annually — some more, some less — 
especially is this the case with buildings. It would be necessary for the 
adjuster to determine if the loss be upon a building, whether brick or 
frame, if it was kept in ordinary good repair. If frame, whether con- 
structed with brick or stone foundation, for in many parts of this State, 
frame buildings are built with sills resting on posts or pillars and even 
flat upon the ground. It will be necessary to know whether the building 
destroyed was occupied by the owner or by tenants, and the state of repair 
in which it was kept — whether painted or not, and when so last painted. 
A building occupied by tenants because of the lack of care depreciates 
more than one occupied by its owner, and still more true is the fact that 
an unoccupied building depreciates more than either of the others. The 
occupancy of the building also in itself, in the nature and conduct of the 
business carried on therein has a great bearing upon the depreciation. 
Whether the building destroyed was occupied for the purpose for which it 
was originally built or has been put to other uses, such as being crowded 
by greater weights than was originally contemplated, would naturally cause 
a corresponding increase or decrease of depreciation. Floors become worn 
and sagged. Walls become cracked. Paper becomes loose. Paint peels. 
and a building that is not painted, if frame, frequently becomes cracked 
by the seasoning of the lumber. 

Miscellaneous occupancies naturally increase the percentage of depre- 



FIRE UNDERWRITERS' ASSOCIATION. 101 

ciation. One of the hardest things to determine is where buildings have 
become inadapted for the uses for which they were intended. Through 
freaks of fashion or fancy, districts of a town or city at times change. 
The Nob Hill of to-day may be the Tar Flat of to-morrow. In California 
particularly this has been the experience of many of our most prominent 
towns, and in the mining sections of our State almost entire towns have 
become depreciated through the giving out of the mines or discontinuance 
of the excitements incident upon the discovery of gold, and the subse- 
quent introduction of railroads has caused new towns to spring up, the 
population of which has been drawn from towns more remotely situated. 

Probably one of the best written works and essays On Hints to Ad- 
justers, is that published by H. C. Tiffany & Co , which I would recom- 
mend to the perusal of all young adjusters. 

Under all circumstances the adjuster should keep his temper, for fail- 
ure to control his own mind would lead to failure to control the mind of 
another. He should thoroughly understand every question involved in 
the case; place himself in the position of the claimant and reason what 
manner of argument would influence him. Do right and reach the truth, 
and from the earnestness of purpose and thorough conviction of your 
position, however diverse may be the preconceived opinion of the claim- 
ant, you cannot help but convince him of the soundness of the position 
taken by you, causing him to accept your conclusions. It may be neces- 
sary at times to say unpleasant things, but your manner should be such 
at all times as to avoid giving unnecessary irritation. There is nothing 
that tends to bring the profession into greater disrepute and injure the 
reputation of companies than ill-advised and hasty settlements made by 
incompetent if not dishonest adjusters, who, jumping at conclusions, 
without proper investigation, assuming in confidence through their own 
powers of estimation the amount of goods in gross, often impede the 
work of the careful and experienced men who, doing their duty, will 
thoroughly examine the simplest case of damage. Lump settlements or 
settlements in gross should studiously be avoided, as the company will 
remain at all times by such settlement in a state of uncertainty whether 
their liability had been fully met or they or the claimant been robbed or 
imposed upon. 

Griswold, quoting Emerigon, says: 

" When one wishes to thoroughly acquire a subject, theory is not to be 
neglected. It serves to develop principle; through it we become learned 
in art, but to be master in that art practice must be joined to theory." 
The great want of the profession is educated adjusters, and previous 
training, both theoretical and practical, should be had before the full 
fledged adjuster is declared or recognized. 

Losses upon merchandise, when the property is totally destroyed, 
should whenever possible be arrived at from the books of the assured; 
7 



102 FIFTEENTH ANNUAL MEETING OF THE 

and there is no more valuable work for the guidance of the young ad- 
juster, than W. H. Lowden's book on Adjustment of Book Losses, to- 
gether with his valuable work of "What to do when the books are 
burned." When the books are fraudulent^ kept or are destroyed, the 
sworn statement from the assured and others should be taken as to for- 
mer inventories, the late purchases, average sales, cash on hand, average 
profits, diagram of the premises occupied, location of goods and their 
probable value; and, in fact, upon all evidence obtainable bearing upon 
the loss, duplicate bills and invoices, and the data so obtained should be 
collated into an approximate statement of the loss. This might be suffi- 
cient to enable the assured to agree and determine as to the amount. 

That the utmost care in the selection of competent and disinterested 
appraisers should be exercised, and no pains be spared to procure the best 
talent available the interests of the companies absolutely require. The 
experienced adjuster will, whenever possible, avoid appraisements, for it 
has been the experience of most of us that appraisements made by disin- 
terested parties — which are rarety found — are many times excessive. 

At all times the adjuster whether in doubt as to liability should hold 
his opinion in reserve until after determining the amount of loss or dam- 
age; or, failing to effect a settlement, should suspend further action and 
require the assured to furnish proofs in due form and submit the same to 
the company. He should in all cases of doubt serve on the claimant a 
written notice forestalling waiver and inform himself as accurately as pos- 
sible regarding the history and fire record of the claimant — the financial 
standing — professional habits — conduct of the assured — and all such 
kindred matters should be given due consideration in the investigation, 
.and reaching of conclusions in reference to the character and amount in- 
volved. In the adjustment of an honest loss all unnecessary delay should 
be avoided, whilst the very opposite is advisable in all cases of a character 
fraudulent or suspicious. All such loss unless finally adjusted should be 
fully reported to the company, detailing the adjuster's views thereon, and 
perpetuating as much of the testimony as has been obtained, leaving fur- 
ther action for future instruction. Frequently statements from railroads 
and express companies, records as to receipts and shipments can be re- 
quired and obtained as corroborative evidence; and in this connection it 
might be well to remind you that where books are burned corroborative 
evidence can be required and frequently obtained from clerks or other 
employes having a knowledge of the stock destroyed. 

The other many and varied infinite things necessary for an adjuster to 
know would take more space and time than can possibly be allotted to me 
here, had I the wish and ability to proceed in this strain; but as I have 
to treat also upon the subject of the Appraiser, I will have to refer you for a 
further treatise upon this subject to the reference books already printed, 
and may perhaps in a short space of time treat further upon this subject 
in the book I am now preparing for publication. 






FIRE UNDERWRITERS' ASSOCIATION. 103 

Refering, therefore, to the subject of Appraisers, I would say: 

APPRAISERS. 

Appraisers are governed by the same principles of law as arbitrators; 
and as much difficulty has been found between insured and adjusters, 
caused by the excessive ignorance of appraisers as to what specific duty 
they were selected to perform, they should be furnished at all times with 
written instructions, and whenever possible, with schedules or inventories 
of the property submitted to them to estimate damage upon. They should 
be made to comprehend that their sole duty is confined under the submission 
of appraisal between insurance companies and claimants, to the ascertain- 
ment and estimating of the loss and damage upon the property submitted to 
them for such estimates, and that all other questions touching the claim 
for loss are beyond their power and authority, and should be at once re- 
ferred by them to the adjuster of the insurance company. 

In the selection of appraisers no pains should be spared to procure the 
very best talent available, as much depends upon the proper selection of 
an appraiser that the interests of the company will be best protected by 
able and honest experts. The labor performed by the appraiser in the as- 
certainment of the damage should be carefully detailed, and appraised 
articles should be so arranged as to correspond as nearly as possible with 
the several items of insurance specified in the policies. Unfair or fraud- 
ulent acts on the part of the claimant or his appraiser should be promptly 
exposed to the representative of the company. 

The submission for appraiser really is but written instructions given to 
the appraisers together with their justification, and should contain at all 
times a blank upon which is to be registered the award and conclusions 
arrived at. The office of the appraiser is that of an expert valuer, who, 
with honesty in his heart and knowledge of prices in his head, with malice 
towards none and fairness towards all, should — to the best of his endeavor, 
judgment, skill and knowledge — determine in as gentlemanly and expedi- 
tious a manner as possible the damages sustained to the property placed 
before him. Circumspection and moderation are two of the most neces- 
sary qualities in an appraiser, and his motto should be at all times: "Be 
sure you are right; then go ahead." 

ARBITRATORS. 

Arbitrators are considered to be the agents of both parties; their acts 
are therefore equivalent to the acts of the parties themselves, and being 
agents of both parties alike and not of one party only, they must not forget 
to be impartial judges, as the}- are the agents through whose acts both 
parties may if they please, estop themselves just as they may by their own 
acts. They should presupposedly be absolutely impartial and should not 
not only possess the quality of impartiality in fact, but have the con- 
science of it in the given case, and sedulously shun all possibility even of 



104 FIFTEENTH ANNUAL MEETING OF THE 

insensible bias. They are, therefore, not representing separate parties 
(though nominated one by each party) and are not the advocates of oppo- 
site sides, but are to execute a joint trust and look impartially at the true 
merits of all matters submitted to their judgment. They should, there- 
fore, be indifferent and impartial both in sentiment and action. 
Hays vs. Hays, 23 Wend., 363. 
Browning vs. Wheeler, 24 Id., 258. 
Keene vs. Battsbore, lEsp., 194. 
2 Russell on Arb., 3d ed., 205. 
9 Ves. Jr., 67. 
It is not always enough that an arbitrator possess the intellectual con- 
dition of impartiality, for if he does any act which is only apparently in- 
consistent with it, that act will in nearly all cases constitute such miscon- 
duct that the award will be vacated. It is not alone the fact, but the 
aspect of perfect fairness which must be preserved, and an arbitrator can- 
not be too careful as to his conduct, holding this end in view. It is not his 
own consciousness of rigid justice that can support his determination of 
the controversy. It is not his conscientious intent to be honest, nor his 
conviction in his own mind that he is so that can suffice, but it is his ex- 
ternal actions that will be subjected to scrutiny; and if these do not bear 
the test the award will fail. His own testimony will be of no avail against 
these apparent proofs of a contrary nature. 
Strong vs. Strong, 9 Cush., 560. 
Bus sell on Arb., 3d Ed., 654-655. 
Phipps vs. Ingram, 3 Dawe, 669. 
Moss on Arb., 534. 
If the person selected as arbitrator has any interest, directly or indi- 
rectly, in the result or decision of the controversy, he is incompetent. 
Parker vs. Burroughs, Solle's Pari. Co., 257. 
Earl vs. Stocker, 2 Vera., 251. 
The existence of relationship or family connection between the arbitra- 
tor and a party to the submission, will be sufficient grounds for a revoca- 
tion pending proceedings, or for setting aside the award afterwards. 
Brown vs. Levitt, 26 Maine, 251. 
A party who has already estimated the amount of a certain loss or dam- 
age, is incompetent to act as an arbitrator unless both sides waive such 
points; and if such fact of previous estimate of the damage by either arbi- 
trator is only ascertained by either party to the submissions after the 
award has been rendered, the court holds that sufficient reason exists to- 
avoid the award. 

Conrad vs. Massasoit Ins. Co., 4 Allen. 
Morse on Arb., 101. 
Strong vs. Strong, 9 Cush., 560. 
Fox vs. Hazelton, 10 Pick., 275. 



FIRE UNDERWRITERS' ASSOCIATION. 105 

Specific acts of arbitrators, such as the receipt of money, or private con- 
sultations with either party to the submission, constitute misconduct, 
and the use of expressions indicative of bias or hostility will suffice to 
render an award void. 

Earle vs. Stocker, 2 Vern., 251. 
Burton vs. Knight, lb., 515. 
Russell on Arb., 3d Ed., 109. 
Chicquot vs. Lequesne, 2 Vesey, Sen., 315. 
In Fox vs. Hazelton, in 10 Pick., 275, the distinguished jurist, Chief 
Justice Shaw, said that: " Parties intending to have their rights decided 
by impartial judges (or arbitrators) are entitled to insist that all shall be 
impartial, and that proof of bias and of strong partiality would form 
serious objections to the acceptance of an award." 

Unless specially provided for in the articles of submission, arbitrators 
need not be sworn. In the States of Louisiana and New Jersey, how- 
ever, the statute requires the arbitrators to be sworn and the swearing is 
indispensable. 

Deputy vs. Betts, 4 Harrington, 352. 
The mode in which the reference is to be conducted depends entirely 
upon the arbitrator, and he must act upon principles of justice and fairly 
to both parties. 

Russell on Arb., 3d Ed., 164. 
Hewlett vs. Laycock, 2 Car. and Payne, 574. 
Haigh vs. Haigh, 31 L. J., Chy., 420. 
If either party to a submission desires to present matters of informa- 
tion upon the subject submitted to the arbitrators, time and place of 
meeting for hearing must be appointed by the arbitrators at their own 
discretion, unless an express stipulation to a contrary effect be embodied 
actually in the submission or rule of reference. 
Russell on Arb., 3d, 164. 
Featherstone vs. Cooper, 9 Ves., Jr., 67. 
Each party is entitled to be present whenever witnesses or arguments 
are heard on behalf of his opponents, and is entitled to present his own 
case both by evidence and arguments before the arbitrators. 
Hollingsworth vs. Leiper, 1 Dall., 161. 
Hagner vs. Musgrove, lb., 83. 
Henri ck vs. Blair, 1 Johns., 101. 
Notice of hearing given to each party must, therefore, be served on 
each party sufficiently long before the time named to give him due and 
reasonable opportunity for preparing his case for presentation. 
Russell on Arb., 3d, 165. 
The notice of meeting need be only, however, of meetings at which 
evidence or arguments are to be heard and not for meetings of arbitrators 
held for the purpose of deliberation or making up of the award, for in 



106 FIFTEENTH ANNUAL MEETING OF THE 

the latter cases it is indeed truly held that the parties to the submission 
should not attend, nor ought to be allowed to attend, such conferences. 

Koloson vs. Carson, 8 Md., 208. 

Lutz vs. Lurthian, 8 Peters, 178. 
Notice to attorney of a party usually is regarded as equivalent to notice 
to the party. 

Morse on Arb., 119. 
Each party must be given sufficient time and opportunity to examine 
any documentary evidence put into the case by his opponent. 

Passmore vs. Pettit, 4 Dall., 271. 

Harvey vs. Shelton, 7 Bev., 455. 
It is in the discretion of the arbitrators to hear or refuse to hear counsel 
as they shall see fit. They should not, however, abuse this diseretion 
as the party is presumptively prejudiced by their refusal to allow him the 
aid which he desires, and their award may therefore be voided. 

Russell on Arb., 3d, 166. 

Collier vs. Hicks, 2 Barn. & Ad., 663. 
Arbitrators should not proceed ex parte to hear the parties, though it is 
said to be highl} T commendable for an arbitrator to ascertain abroad by 
inquiry for his own satisfaction the price of work, labor, material, or the 
truth of any other matter which may be said to be of comparative public- 
nature. 

Russell on Arb., 3d, 184. 

Drew vs. Drew, H. L., March, 1855. 

Morse on Arb., 126, 127. 
An arbitrator has no statutory authority to swear witnesses. Where, 
therefore, the submission requires witnesses to be sworn, the arbitrators 
must call in for such purpose a magistrate or notary public or other of- 
ficer empowered to administer oaths: 

Russell on Arb., 3d, 176. 
Under the law in the United States, arbitrators are not bound by the 
strict rules of law as to the admission of evidence: 

Hooper vs. Taylor, 36 Maine, 224. 

Maynard vs. Frederick, 7 Cush., 246. 

Fennimore vs. Childs, 1 Halstd., 386. 

Latimer vs. Eidge, 1 Bain., 458. 

Morse on Arb., 3, 135. 
An arbitrator selected by reason of some especial knowledge or skill 
possessed by him with reference to the matter in controversy (that is, 
selected as an expert), so that it is apparent that the parties intended to 
rely upon his personal information, investigation and judgment, will b# 
justified in the refusing altogether to hear evidence: 

Eads vs. Williams, 24 L. J., Chy. 

Caladonian Railway Co. vs. Lockhart, 3 Macq., SOS. 



FIRE UNDERWRITERS' ASSOCIATION. 107 

Johnstone vs. Cheap, 5 Dow, 241. 
Mundy vs. Black, 6 C. B., N. S., 557. 
This is, however, as Mr: Russell says, "a delicate step to take, for the 
refusal to receive proof'where proof is necessary is fatal to the award." An 
arbitrator, however, has some power within his discretion to determine 
how much evidence he will hear, his general duty being to hear all evi- 
dence material to the case which is offered. 
Russell on Arb., 3d, 178. 
Morse on Arb., 142. 
Johnston vs. Cheap, 5 Dow., 247. 
The dissent of an arbitrator from the award of his fellows must be ex- 
pressed at or before the time of publication. If he unites with them in 
making the award, or is present at the publication and pronounces the 
award to be the decision of the arbitrators, it has been held that evidence 
going to show that, as a matter of fact, he differed in opinion from the 
others, is entitled to no weight: 

Jackson vs. Gager, 5 Cow., 383. 
Hox vs. Jagger, 2 ib., 638. 
Campbell vs. Western, 3 Paige, 124. 
No arbitrator can delegate his authority to another, or can elect another 
to act with him unless specially authorized by the submission to do so: 
Russell on Arb., 3d, 190 et seq. 
Luizwood vs. Eade, 2 Atk., 501. 
Morse on Arb., 166. 

Proctor vs. Williamson, 29 L. J., C. P., 157. 
Mr. Morse, in his celebrated work on Arbitration, says: 
" Arbitrators have power without any special provision to call in valuers 
to assist them, though if there be a provision for their doing so that will 
supersede their general power and he can only act under and by virtue of 
it." 

Anderson vs. Wallace, 3 CI. & Fin., 26. 
The theory is sufficiently plainly developed that the arbitrator may for 
his own information and guidance ask information from persons whose 
capacity to form an accurate opinion concerning the subject matter he relies 
on; that the statements thus obtained by him are to be treated as evidence 
or as aids by which he may make up his own opinion. He may give them 
such weight and credence as he sees fit, even to the point of founding his 
judgment upon them, but it is essential that he should form his judgment 
and not adopt and follow them absolutely, blindly, or in contravention of 
an actual opinion of his own. The process resembles the taking of expert 
testimony; though it differs in the one essential particular that the arbi- 
trator may make these investigations privately without notice to, or 
presence of the parties: 

Morse on Arb., 169. 
Russell on Arb., 3d, 202. 



108 FIFTEENTH ANNUAL MEETING OF THE 

An arbitrator may consult or employ counsel to assist him in framing 
his award or obtain the opinion of counsel as to questions arising in re- 
gard to framing the award, or questions concerning the dispute itself: 

Dobson vs. Grove, 6 Q. B., 637. 

Featherstone vs. Cooper, 9 Yes., Jr., 67. 

In re Hare, 6 Bing., N.C., 158. 

Goodman vs. Sayers, 2 Jac. & Walk., 249. 
If a submission be entered into in pais and not in Us pendens, or under 
a statute, it constitutes the sole source of the arbitrator's power. From 
it, and only from it, is to be gathered the extent of his authority: 

Boston Water Power Co. vs. Gray, 6 Mete, (Mass.), 131 pp. 170. et 
seq. 
The general rule is that the power of the arbitrator is limited to the de- 
termination of precise^ the questions which are submitted: 

Cook vs. Carpenter, 34 Yt., 121. 

Butler vs. Mayor of N. Y., 7 Hill, 329. 

Kobinson vs. Moore, 17 N. H., 479. 

Hays vs. Forskoll, 31 Me., 112. 
Of coarse the arbitrator cannot vary or modify the precise question 
submitted and substitute in place of that matter which the parties wish t<- 
haye decided some other similar, cognate or collateral point bearing upon 
the same general subject or some other form of the same controvei 

Wyman vs. Hammon, 55 Mr., 534. 
Unless otherwise restricted by the submission or rule of court, arbitra- 
tors and referees are final judges not only of all matters of fact, but also 
of all questions of law which arise in the course of the proceeding- 
fore them, or which are inyolyed in the decision of the subject of the 
submission: 

White Mt. Railroad vs. Beane, 39 N. H., 107. 

Kleine vs. Cattara, 2 Gall., 161. 

Brown vs. Clay, 31 Me., 518. 

Boston Water Power Co. vs. Gray, 6 Mete. (Mass.), 131. 

Johnson vs. Noble, 13 N. H., 2S6. 

Walker vs. Sanborn, 8 Greene, 288. 

Smith vs. Thorndike, ib., 119. 

Whitmore vs. Lea Ballister, 35 Me., 488. 

Hazeltine vs. Smith, 3 Yt., 535. 
Lord Thurlow said: "That an arbitrator has greater latitude than the 
Court, in order to do complete justice between the parties, and in all 
matters of differences, an arbitrator should consider not legal only but 
also equitable demands — demands of all sorts." 

Delor vs. Barnes, 1 Taunt., 47. 
When the arbitrator or referee has made, or as it is -aid in so] 
has made and published, his award or report, as a completed in-trui: 



FIRE UNDERWRITERS' ASSOCIATION. 109 

his power is wholly at an end. He has exhausted his authority. He is 
thoroughly functus officio. He can do nothing more in reference to the 
arbitration or the subject matter. He cannot reopen the case nor make a 
new or supplementary award or report, nor alter or amend a report or 
award already made, nor file additional explanatory, alternative or amend- 
atory documents. 

What he has done must stand or fall without further aid or assistance 
from him. He can neither support or impeach it. 

Bayne vs. Morris, 1 Wall., 97. 

Woodbury vs. Northy, 3 Greenleaf L., 86. 

Clement vs. Eohrback, 15 Pemi. St., 116. 

Aldredge vs. Jessiman, 8 N. H., 516. 

Lonsdale vs. Kendall, 4 Dana, 613. 

Cleveland vs. Dicksons, 4 J. J. Marsh, 226. 

Bigelow vs. Maynard, 4 Cush., 317. 

Ward vs. Gould, 5 Pick., 291. 

Doke vs. James, 4 Comst., 567. 
Differences of opinion between the functions of an umpire and of a 
third arbitrator: 

An umpire is a person whom two or more arbitrators under authority 
of the parties to the submission, select. His function is to decide the 
controversy which the arbitrators have been unable to decide. He has 
not to act in conjunction with them, but as a substitute for them. He 
is, as it were, a sole arbitrator, with the same duty of hearing the whole 
case cle novo as would have devolved upon him had he been originally ap- 
pointed alone, though this duty may, of course, be waived by consent 
of parties. Neither of the arbitrators need join with him in his award; 
if they do so, it will not, however, avoid the award, but their joinder will 
be rejected as surplusage. It is evident, therefore, that an umpire is to 
be distinguished from a third arbitrator since his powers and duties are 
widely different. 

Haven vs. W T innisimett Co., 11 Allen, 377. 

Shields vz. Reno, 1 Overt., 313. 

Bassett's Admr. vs. Cunningham's Admr., 9 Grat., 684. 

Mullins vs. Arnold, 4 Sneed, 263. 

Ricon vs. Barry, 4 Rand., 275. 

Morse on Arb., 241. 

King vs. Cook, Charlt., 286. 

Boyer vs. Amand, 2 W'atts, 74. 

Butler vs. Mayor, etc., of N. Y., 1 Hill, 49. 

Lyen vs. Blossom, 4 Duer, 318. 
A third arbitrator, when only called in, is simply an addition to the 
number of the original board, and altogether constitute a new board, and 
this, too, although he be called erroneously an umpire. 



110 FIFTEENTH ANNUAL MEETING OF THE 

The customary proviso, where a third arbitrator is desired, that after 
such party shall have been named the award of the majority shall be final 
shows, that such supernumary is to act with his fellows originally nomi- 
nated in hearing and deciding the controversy. The award must then ex- 
press the rinding of, and be executed by at least the majority of the new 
board. 

Haven vs. Winnisimett Co., 11 Allen, 377. 
The third arbitrator is not justified in considering only the differing 
opinions of the two original arbitrators and selecting for his concurrence 
that which seems to him to be the nearer to correctness. He must exercise 
his individual and independent judgment for the purpose of making up 
an award which he considers proper. He must consider the whole case 
and not mereW the points on which the arbitrators have been unable to 
agree. But he may, if he chooses, accept and adopt as his own their re- 
port upon the points wherein they have agreed, and by incorporating it 
with his own findings on the other points his award thus made up upon 
the whole will be good. 

Morse on Arb., 242. 

Haven vs. Winnisimett Co., 11 Allen. 377. 

Tollitt vs Saunders, 9 Price, 612. 

Crabtree vs. Green, 8 Geo., 8. 

Executors of Finney vs. Miller, 1 Bailey, 811. 
Misconduct and irregularity on the part of an arbitrator, umpire or 
referee, of course voids and will set aside an award. Such misconduct or 
irregularity may consist in partiality, receiving ex parte communications, 
relying wholly upon the statement of a party, refusal to receive evidence, 
refusing to allow time, making awards on Sunday, fraud, corruption, undue 
means, examining into a matter beforehand and allowing party to know 
substantially what conclusion he has come to, buying up a claim included 
in the submission, private agreements of the arbitrator with either party 
concerning the subject matter in dispute, though not affecting the arbitra- 
tor's own interests, knowingly acting upon an incorrect statement of facts, 
neglecting to do any act which it is his duty to do, or doing any act which 
he ought not to do, or allowing a party to do so in the course of the pro- 
ceedings, omissions to have witnesses sworn when required by the sub- 
mission, the sufferance of a party to withhold his books and papers from 
inspection by the other whereby he procures the allowance of an un- 
founded claim, which fact would have been disclosed by the books, g] 
mistakes and negligence, bias or prejudice. 

Strong vs. Stong, 9 Cush., 560. 

Kussell on Arb., 3d ed., 654. 

Morse on Arb., 533, 544. 

Conrad vs. Massasoit Ins. Co., 4 Allen, 20. 

Cleland vs. Healy, 5R. I., 163. 



FIRE UNDERWRITERS' ASSOCIATION. Ill 

Phiffs vs. Ingram, 3 Dawe, 669. 

Sisk vs. Garcey, 27 Md, 401. 

Hartshorn vs. Cuttrel, 1 Green's Ch., 297. 

Van Cortland t vs. Underhill, 17 Johns., 405. 

Papper vs. Gorham, 4 Moore, 1481. 

Nickalls vs. Warren, 6 Q. B., 615. 

Banks vs. Banks, 1 Gall., 46. 

Whatty vs. Moreland, 2 Dowe, 249. 

Shephard vs. Brand, Cases temp., Hardwicke, 53. 

Barnardiston, 463. 

Blennerhassett vs. Day, 2 Ball & Beat., 104. 

Chichester vs. Mclntyre, 1 Dowe, Ins., 460, etc. 
In conclusion, I desire to thank you for the kind attention bestowed 
upon this paper; and if it will assist you at any time in the adjustment of 
a loss, I have at least accomplished an additional object. I lay no claim 
to originality in the paper presented to you, but have attempted to collate 
points and authorities upon the more important subjects encountered 
daily both by the adjuster and the appraiser. That in a paper of this 
kind the subject can be treated but in a cursory manner is self-evident, 
and is my only excuse for what may be lacking. 

Respectfully yours, etc., A. J. WEZTLAR. 

The President — Gentlemen, the paper of Mr. Wetzlar 
is certainly very exhaustive and it is very complete, and 
it is very valuable for reference to those who are begin- 
ning in business, as well as for those who have been ad- 
justers for many years. As I understand it the proposi- 
tions he advances are backed up by references to court 
decisions to which we can refer, so they are not mere 
opinions of his own. 

I have here a telegram from Mr. Ashton. If you 
remember, in yesterday's proceedings we were to have 
heard a paper from him, but evidently he forgot all 
about the paper. He says: 

"Regret absence from your meeting. Accept best wishes for continued 
success of the Association." 

This is dated from Hartford, Ct. 

Mr. Sexton — I agree with you on this paper of Mr, 
Wetzlar's. It is just such a paper as we would expect 



112 FIFTEENTH ANNUAL MEETING OF THE 

from him, but of course we have to criticise it; that is 
what he wrote it for. In the first place, it places the 
ideal adjuster so high that none of us will ever reach 
the position. Unless I misunderstood him, he stated 
that sixty-five per cent, of the fires were incendiary; i- 
that correct? 

Mr. Edwards — If I understand the paper correctly, the 
large percentage of incendiary fires referred to by Mr. 
Wetzlar were not fires started deliberately by the assured, 
but fires originating from acts which may be classed as 
incendiary for their carelessness. I think he modified 
the statement. Now, by classifying all those as incendiary, 
he is probably correct, otherwise, I think he is too high 
in his estimates. I was very much amused at the perfect 
character which he drew for an adjuster. It is a stand- 
ard far above any that we can reach. 

The President — There is another point that Mr. AVetz- 
lar settled in rather a positive way in his article, and I 
am glad it is settled, provided he backs it up well with 
authorities, and that is the question as to what the man- 
ufacturers' damage is. That is a subject that we will 
have treated more fully this afternoon by Mr. Lowden. 
It is a matter which has been in controversy for a long 
time, and I am very glad that it has been referred to in 
his paper, and that he has backed up his opinion with 
authorities. 

The next paper on the programme is the "Special 
Agent's Relation to the P. I. U.," by Mr. Kmne. It is 
one that I think will be of interest to us, as I believe 
that a great many of the special agents on the road right 
now, have no more idea what their duties toward the 
Pacific Insurance Union are, than the local agents in the 
field. 



FIRE UNDERWRITERS' ASSOCIATION. 113 

Mr. Kinne — Well, Mr. President and gentlemen, I 
am inclined to think that our President has expected, in 
giving me this topic, that I should treat it in a some- 
what different manner than you will find that I have. 
And I am rather glad that I have decided to talk in the 
way that I shall, when I note on the programme the 
peculiar insignia of the manager as portrayed there; 
where he is beckoning the fellow 7 on with one hand, 
and a great big whip to lash him with in the other. 

(Reading). 

THE RELATION OF THE SPECIAL TO THE P. I. U. 

The first duty of a special agent is to obey the orders of his superior 
officer, and in accordance with this idea, Faymonville commands and I 
obey — to the best of my ability. 

There is no particular amusement in talking about our relations, be 
they general or special, but it is always considered the proper thing for 
some one to "bell the cat," talk plain and get the " cussin," and so here 
I am, according to orders, and no one without the countersign can pass 
the line of pickets thrown out by our Pacific Insurance Union. 

It must be understood at the outset, however, that this paper is not in- 
tended for publication, and that the writer's name and address is simply 
given as an evidence of good faith and to show that he means business. 

The theme is given me by your President, who was well aware of my 
vacuity of original ideas, having written myself dry in years goue by, and 
while I said no, and no, he would still continue to noisily punch me into 
the ranks and command obedience. And yet the theme, when you come 
to think of it, is really thoughtful and improving to anyone who is in 
earnest in his profession, and its consideration should be fruitful if we 
ponder upon it properly. 

Mutuality of interest governs everything in this mundane sphere of 
ours, and possibly when we don eternal robes in the world to come, we 
will get together in squads and combine on various propositions for mu- 
tual interest and protection. And why not? It would not seem natural 
and home-like if we did not retain some of the attributes of this life, 
and I am inclined to think that we can never appreciate anything else, 
and so we will then, as now, confer together on pleasing topics, talk 
over the phases of the then existence, and no doubt growl a little at the 
powers that be for giving the other fellow the silver lining, while poor 
ns gets the damp side of the cloud. 

But growling will do you no good. Some people with honest opinions 
— in their mind — and sprouting pinions of honesty on their shoulder- 



114 FIFTEENTH ANNUAL MEETING OF THE 

blades, while playing on a harp of a thousand strings, would worry be- 
cause hell will not freeze over and allow them to skate on the thin ice 
that separates them from exposed dishonesty and dissimulated deceit. I 
am weary, you are weary, we all are weary of such men, and yet the man- 
ager knows that while many special agents have been properly born, he 
has spoiled lots of them in training; that he has caused many good men 
to have gone wrong from imperfect teaching and improper example. 
Therefore, I do not propose to talk to and advise and lecture the case- 
hardened sinner, but simply sound a word of advice to the tractable and 
as yet unbiased mind; to those untutored in such managerial ways as are 
dark and in such insurance tricks as are vain. 

Do not understand me as having any desire to imply that the elder 
special is bad and only seeks devious ways to do improper things and yet 
have them appear as lustrous examples of propriety. I do not thus pro- 
pose to malign all the gray-haired and bald-headed patriarchs in the pro- 
fession, for twenty-five years in the ranks are putting me a little that way 
myself. I simpl}- want to try and sow a little seed in virgin soil and not 
worry about these old heads who have not been corrupted in the profes- 
sion, or those who have gone beyond redemption. 

And now we come to the real special, whose cutaneous tenderness is 
nil, and whose desire to learn is inordinate. Any active campaign is in 
the field. The grand array of workers are the locals who are gathering 
recruits who desire indemnity, and while the commanding officers are sur- 
veying the field with glasses of greater or less magnifying power from the 
hill-tops, the actual directing ones in the industrial hive are the officers of 
the day, the specials, who visit the outposts in mountains and valleys, 
periodically and unexpectedly as the case demands, and infuse life and 
energy into those who are in charge of the picket lines. 

You do your work more or less faithfully, and here is where the reverse 
of the picture can be shown, for some managers apparently view the field 
of battle from their secure point of vantage through the big end of their 
field glass; which is so unnatural; which so distorts and reduces the size 
of the object, that he truly is trying to fight his battle from afar off. Yet 
at the same time do not forget that through him, or under him, or over 
him. you reach the compendium and epitome of all our experience and 
knowledge, the Pacific Insurance Union, which subserves our interests and 
attains our common ends. The thing narrows itself down to this. So 
long as obligations are mutual and honors are easy, the manager, the 
special and the Union must meet on common ground. If the special agent 
will uphold the propriety and wisdom of uniform rates and uniform prac- 
tices and not go around lying to his local agent and patrons, and trying 
to make them believe that the excessive rates and low commissions are all 

brought about by the other fellow and that d d P. I. U.;— if the special 

agent would always tell the truth about the risk he surveys; would never 



FIRE UNDERWRITERS' ASSOCIATION. 115 

try to cultivate a client with the hope of a reduced rate; would make a 
plain, honest diagram that anybody would understand, and no one 
gainsay, then, and not until then, would the manager of the P. I. U., its 
executive committee and all its members, feel to rely on his representa- 
tions. If the special would only be true to himself and honest with his 
neighbor, then the P. I. U. would be glad to extend the hand of fellow- 
ship to him, all of which should be "the relation of the special to the 
P. I. U." 

Then his diagrams and representations would be taken as correct in 
every particular, and rates and privileges would be made and granted as if 
they were examined and passed upon by surveyors of the P. I. U. 

Please understand that in talking to you specials, I am not considering 
you as an itinerant local who is working a certain field for business under 
the guise of special agent, who prints his cards at the cost of the company 
with a large S for special and a small lower case a for agent; — not as a per- 
ambulating, shifting solicitor that is here to-day and there to-morrow, — but 
as a real, live special agent, who supervises and trains and educates the 
local agent in everything that comes before him. 

And now let us get down to business. Practical results from practical 
ideas. Many years ago I was taught that famous axiom, " Things which 
are equal to the same things, are equal to each other," and my conclusion 
is this: The manager cannot get along without his special, the P. I. U. 
cannot get along without the manager, eryo, the P. I. U. cannot get along 
without the special. But after that comes the trying proposition, that 
one numbered 11, Book 4, pons asinorum, and I think I crossed it. 

Now, brother specials, if you desire to get over the bridge of asses, and 
my advice is worth anything, and you want to establish decent and 
honorable relations with the P. I. U., don't do lots of things the other fel- 
low does and thinks he's smart, and I'll begin with another Kinne Rule. 

Don't pass upon and approve a risk to-day that you would be ashamed 
of, if it burned to-morrow. This means, rate, valuation, physical and 
that unknown quality, moral hazard. 

Don't hurry about getting out of a town if there is anything in the 
way of honest business to keep you. If you can possibly remain a day 
longer without blowing in a dollar and a half at the corner grocery, do so, 
but jog right along when there is no real need for your further presence. 
Neither cards nor girls should detain you. 

Don't leave a town with a risk unsurveyed that 3 7 ou ought to have seen, 
and thus be unable to respond to the pertinent queries of the man in the 
back office who may perhaps know little about the risk but pays you to 
tell him. for he may have been there himself. 

Don't try to educate a local agent into the belief that a dwelling with a 
cow stable underneath is a common occupancy, for it is not so, — you per- 
vert the local's native honesty, lower yourself in your own estimation and 
,uet very little milk out of the cocoanut. 



116 FIFTEENTH ANNUAL MEETING OF THE 

Don't let a local think that he knows more about the insurance business 
than you do. He may — lots of 'em do — but don't let him know it. Study, 
read books, talk with the young men on the road — they know it all — look 
wise, say little, and you're all right. 

Don't ever say that the rate on a risk is too great. If you cannot show 
cause why the rate on any given risk should no' stay where it is, or be in- 
creased, then you are not yet a special agent. 

DonH sneak out under the mantle of the P. I. U. If you do. it shows 
a lack of confidence in an institution you are bound to uphold, or a mass 
of ignorance that will condemn you for all time. In other words, 

Don't make an ass of yourself if you can well avoid it. 

But epitomizing thus I am constrained to think that it is about time to 
change from the negative don't, to the affirmative do, for I once read in a 
book that "when I was a child I spake as a child, but when I became a 
man I put away childish things." So the childishness of what not to do, 
resolve? itself into what to do. The Locals don't know it all, the Specials 
don't know it all, the Managers don't know it all, and I am safe in saying 
that the Pacific Insurance Union don't know it all. But it is willing to 
learn, and from whom can it learn more than from the Special. Agitation 
is the only means of reform and everybody is a reformer if he cares to add 
his mite to the mighty results that can be accomplished. Thus the Special 
— if he can and if he will add to the information desired by every under- 
writer — becomes an important factor in the whole mechanism. 

Insurance of any kind is but a system of general averages, and whoes^er 
adds to the information which goes to make up the basis and foundation 
of our Pacific Insurance Union, improves and cements the compact and 
solid system that is the reliance of both the experienced underwriter and 
the veriest tyro in the business. 

And how best can the Special improve his relations with the P. I. CJ. 
The field is ripe and he is always in it. He can do a great deal as a col- 
lector of facts and figures, data and experience that can and should aid the 
old and the young P. I. U. surveyor, the practical and the fledgling in their 
system of making rates. 

He should be everywhere a committee of one on statistics and thus aid 
the P. I U. 

He should know or learn all about local agents, and have some way to 
reach the P. I. U. Manager to the benefit of all concerned. 

He should know all about forms of policies, for they are the contract be- 
tween the assured and the companies that form the P. I. U. 

He should be familiar with the subject of legislation and taxation, and 
aid the people to understand that the place to correct evils is not in S 
mento, or other State Capitals, but to ask the P. I. U. what can be done to 
reduce rates. 

He can tell them, too, that their fire department and water supply arc 






FIRE UNDERWRITERS' ASSOCIATION. 117 

important and most essential factors in better protection, and consequent 
better rates. 

He can prove to them that statistics in the insurance business are the 
basis of our business, and without which everything would be guess-work 
and a gambling proposition. 

Do all these things for yourself, for the company you represent, and you 
are doing it for the P. I. U., and improving the relation you bear to that 
organization. If an agent kicks about regulations, you are the one to 
pour oil on the troubled waters. Explain about the principles of insurance 
to him. Reason about rates and commissions, and losses and hazards 
(moral, immoral and physical); and generally pour out from your fertile 
cruse all you know, and more too — for, like the widow's of old, your can 
must never run dry. 

Don't lay every trouble at the door of the P. I. U. because you don't 
know any better. If you think you see a something that should be cor- 
rected, bring your mare's nest home with you and let it reach the P. I. U. 
in a legitimate and sensible way. It is organized for the greatest good for 
the greatest number, so don't keep plucking feathers from the bird that is 
laying good eggs for you. 

From the cradle to the grave we must lean on some one else to a certain 
extent, and possibly is there no greater example of this than in our own 
profession. Experience is the corner-stone of the business of underwrit- 
ing, and the more exact we can make a system of general averages, the 
better for all concerned; and I believe it rests mainly with the special 
agents to so cultivate the field that the local will understand that the com- 
panies are his friends, and that they are not expected to work out their 
salvation on a basis of luck or a haphazard principle. Be true to your- 
selves, be true to each other, and while the ethics of the profession will be 
thus maintained, you also will improve your relations with the Pacific In-' 
surance Union, and both you and it will surely prosper. 

C. MASON KINNE. 

[Applause.] 

Mr. Folger — I trust Col. Kinne was not in earnest in 
the earlier portion of his remarks, when he said any part 
of that paper might be objectionable. I feel amply 
repaid in coming from Portland to attend this meeting, 
after having heard this paper. 

The President — I agree with Mr. Folger in that. I 
have no idea of allowing that paper to escape, and if it 
don't go into the proceedings we will all know the 
reason why. I certainly feel like felicitating myself 



118 FIFTEENTH ANNUAL MEETING OF THE 

upon my choice in asking Col. Kinne to prepare this 
paper. It is true that he felt that he had done his share 
toward the entertainment of the members of this Asso- 
ciation by writing previous papers, but finally he did 
consent to write on this subject, and I am very glad he 
did. 

The next paper on the programme is " Upon the Ele- 
ment of Estimate in Loss Adjustment/ 7 by Mr. H. M. 
Grant. We will be very glad to hear from Mr. Grant. 

Mr. H. M. Grant — I premise by saying that this is dry, 
extra dry. 

UPON THE ELEMENT OF ESTIMATE IN LOSS ADJUSTMENTS. 

What is a song without a prelude, an opera without an overture, a hot el 
without a preface, or an association article without an apology? This 
then is mine apology, humbly written, that I have taken no time and had 
little opportunity to consult " other writers," or to know what has been 
better said, on the subject I have undertaken to discuss, but I have thought 
a good deal "Upon the Element of Estimate in Loss Adjustments." 

The demands of an adjustment of a loss are to mete out exact justice 
to the assured within the terms and conditions of his policy, and to pre- 
serve the same justice for the assuring company. In the adjustment of 
book losses this is many times an extremely difficult task, encumbered 
with intricacies and susceptible to the most delicate variances, the latter 
especially when large values are concerned, when the variation of a frac- 
tion of a per cent, raises or depresses the scale and directs the pointer to 
more or fewer degrees, meaning dollars or hundreds, oneway or the other. 

In the adjustment of every loss there enters at some portion of its 
detail or progress an unavoidable element of estimate. Except by chance 
the estimate can in no case be exactly right. To cause it to approximate 
a just conclusion as well as a correct one requires the exercise of all the 
skill, experience and care at the command of the adjuster. It must be 
something more than a shrewd guess or a haphazard inference; it must 
have a foundation carefully laid, squared and plumbed and pronounced 
good, and be built up with material carefully weighed, measured and 
fitted. Citing the more common of book losses met with, for illustration 
the merchandise losses, the element of estimate enters in here in respect 
to profits. They cannot be determined with exactness in any ordinary 
system of book-keeping, for the period of time between the last inventory 
and striking of balance of business accounts, and the date of fire. I 
have experienced in one case one system of book-keeping wherein the 



FIRE UNDERWRITERS' ASSOCIATION. 119 

records of each day's sales were accompanied by the actual advance profit 
computed on every article sold, so that at date of fire, or on any other 
-day, profits and inventory were readily apparent, but this method is so ex- 
tremely rare as to be a notable exception to the general fact that in no way 
can the profits be accurately determined, or except by happy chance cor- 
rectly given, during this intervening period untimely limited b}^ the oc- 
currence of the fire. It must be a matter of estimate and agreement. 
That estimate must approximate correctness to be satisfactory or to do the 
even justice, and herein the necessary exploitation to make it so. It is so 
easy to err by hundreds or thousands of dollars in the amount of the loss 
where large figures are involved, either (and more likely) against the com- 
pany, or against the assured, by the over-estimate or under-estimate of a 
few per cent, or a fraction in the estimation of profits. 

To emphasize the idea I have expressed, let us take the illustration of 
a merchandise business with sales of large aggregate, and having a well 
kept set of books. By these books we are able to clearly deduce the per- 
centage of advance profit during the past five years, to wit: 
For 1884 the net sales were $161,400, with advance profit of 40i per cent. 
For 1885 the net sales were $172,000, with advance profit of 41 per cent. 
For 1886 the net sales 'were $178,000, with advance profit of 42 per cent. 
For 1887 the net sales were $178,000, with advance profit of 40 per cent. 
For 1888 the net sales were $176,000, with advance profit of 41 per cent. 

The loss takes place during 1889, and as we have no facts of the profit 
for this year, it must of course be estimated. Suppose the loss had oc- 
curred in 1888 and we had estimated profits at 40 per cent., the same as 
they were found to be for the previous year. We can now clearly see (no 
fire occurring to disturb its ascertainment) that we would have been wrong, 
for the percentage actually was 41 per cent., and in making our estimate of . 
40 per cent, we would have done the assured an injustice by $1,257 in the 
amount of his loss. Again, if we had decided at 41| per. cent, we would 
have done ourselves an injustice by only one-half of 1 per cent., but it 
would have meant $722. So subtle are the variations of a fraction in con- 
sidering large amounts. How much more glaring the difference in con- 
sidering amounts, large or small, if the error be 5 or 10 per cent, in the 
estimate, which it might be, on parol, or if there were no record of pre- 
vious books to guide, or a lack of care in investigation. It might be 
argued that it would cut no figure as the loss is " total anyway " beyond 
it, but with this we have nothing to do. Our mission is to find what the 
loss is, and by correct and careful methods, and how do we know the loss 
is total till we ascertain, perchance we find it isn't when we test it care- 
fully as we should. I shall have occasion to refer again to this illustra- 
tion. 

An important initial step in the adjustment of losses embodying this 
character of estimate, is to first get the minds of the adjuster and asaured at 



120 FIFTEENTH ANNUAL MEETING OF THE 

once on the point of what is meant by percentage of profits. Except per- 
haps among the largest and best conducted mercantile institutions there 
is a difference of understanding. Among some of these also, as well as 
with the average country merchant (with whom we are apt to have most 
to do), what is understood to be percentage of profits is the ratio of the 
balance of merchandise account taken from inventory, that is gross profits* 
to the gross amount of sales. In other words, so many goods are sold, 
the profit is so many dollars, and the percentage of the profit is so much 
on these sales. Many book-keepers have been so instructed to make the 
summary of the firm's business. The percentage of net profits by this 
method is the ratio of amount of profits less all expenses, cost of conduct- 
ing the business and losses, also computed on gross amount of goods sold. 
Such an idea is apt to be in the mind of the average merchant, whose loss 
we have to adjust, when we undertake to find by inquiry his estimate of 
profits, in the absence of any books by which we may ourselves be guided, 
and also in his mind when we talk about it at all. He is aware that he 
calculates to mark up his goods over their cost, so as to produce him a 
profit, but the percentage of this profit he is apt to switch off in his own 
mind to apply on the amount which his goods sell for and calls it gross 
profits. He is not apt to base the percentage on the cost of the goods sold. 
To arrive at a definite understanding is the first duty. Many unpleasant 
differences may arise before the adjustment is brought to a conclusion if 
he is thinking of one thing and we of another. Let it be understood in 
the first place that we mean advance profit. Col. Kinne wanted a word, 
and this one that I now coin is a good one, not " gross profit," which may 
be liable to misrepresentation, but "advance profit," meaning, and can 
mean nothing else, the profit and basis of percentage of profit which the 
goods realize for the seller in advance of invoice cost. Then we are on the 
right basis of dealing with the invoice cost, to be followed all through for 
all calculations. 

Now comes the estimate of profit, an important point in which we can 
only seek to do even justice to both parties. We, may have before us a 
well kept set of books, and a clear statement of the annual percentage of 
advance profit for several years, as in the illustration I have made, or one, 
however profits may have been previously calculated by assured, from 
which we may deduce such information of consecutive years' advance 
profit, and this becomes a valuable guide in making our estimate, but is 
only a guide and must be followed not blindly but with open, comprehen- 
sive view. An easy error into which to fall is to assume that inasmuch as 
we have the percentage of five preceding years neatly before us, an ac< 
of the five years would be a fair estimate for the present year; but this 
won't do, for we must remember first that a period of five years is fruitful 
of many changes of conditions, and the average of them is no criterion for 
the present. Again we must not forget that (our illustration) up to and 



1 



FIRE UNDERWRITERS' ASSOCIATION. 121 

including 1886, when the profits ran up to forty-two percent., this was the 
only store in town and held the monopoly, after which time another store 
was opened and prices had to be reduced perforce of the competition, and 
although sales kept up pretty well the profit was smaller, and there is no 
reason in taking such a state of things into the average, even if there were 
no other reason against basing estimates on the average of the past. 

It might also be argued that last year's percentage of profit could prop- 
erly be taken for the present year's estimate in the absence of positive 
knowledge, but this would be fallacious reasoning, for we see that for the 
past five years each year's average has varied from every other. Last year 
it was forty-one per cent., and the year before forty per cent. Perhaps 
this year's percentage is nearer that of the year before the last. Then, too, 
we are considering a partial year now, previous to the fire, against a full 
twelve months average of former years. We have already seen the subtlety 
of even a slight error in an estimate, and we cannot say that last year's, 
or any other year's experience, which itself varied from other years, is a 
just basis, without examination. This variation is due to some cause. Let 
us try to discover what causes may affect the present year's or term's 
average as compared with the last year's, and govern our estimate accord- 
ingly, and so make it the nearer approach correctness. 

Competition, as we have seen, and as can readily be accepted as true, is 
a, very probable prominent affecting cause. To what extent this may have 
entered into this year's trade is a matter to be investigated and considered. 
If there has been a race between merchants, whereby "leaders " have been 
<c marked down, " sales will doubtless show an increase, but the general 
average of profit be reduced. Has a new store opened up strong enough 
to be a rival, former selling prices must be reduced to hold trade or to 
beat the other, and profits will show a reduction. Mark here a subtle 
mistake possible to make if, in this case, ignoring the causes of increased 
sales, on them we assume also former average of profit. 

Akin to competition as an agent is the variation in the prosperity of the 
resources forming the support of trade of the town. Anomalous as it may 
appear at first glance, the year of most prosperity of resources, that is, 
above the normal, most fruitful to the producer, of well paid and abund- 
ant employment to the laborer or artisan, is not the year of the greatest 
percentage of advance profit to the merchant. He may sell more and 
higher valued goods and earn more net profit, not greater percentage but 
more net income profit, have more money at the end of the year, but 
what concerns us, he has sold his goods at less profit over their cost, been 
obliged to, because of the competition of ready money, and independence 
attending the plethoric purse. The producer comes to him, not with the 
former abject and lowly mein of less prosperous years, doubtful of 
extended credit, and sure of being denied it elsewhere or whipped into 
line if he seeks it, buying what he must at the larger profit he is obliged 



122 FIFTEENTH ANNUAL MEETING OF THE 

to pay consequent upon his poverty and dependence, and which the mer- 
chant is able to exact either in view of prolonged credit or by virtue of his 
necessities, but now with surplus money on hand from sale of his abund- 
ant products, or conscious and confident of the latent availibility in his 
surplus produce, grain in warehouse, fruit consigned, etc., the terrors of 
debt dispelled, is able to look about him, buy closely, perhaps buy abroad, 
make his patronage a favor and eagerly sought, and thus compel a level- 
ing of prices and a more reasonable margin of profit in order to secure it. 
He may buy more things and higher valued ones than ordinarily, but he 
pays the merchant a less margin of advance profit on them. Such a con- 
dition of trade needs to be noted by the adjuster in his comparisons. 

Conversely, however, in a year of paucity of resources, below the 
normal, hard times, it does not follow that there will be found a corres- 
ponding increase of percentage of advance profit, for the reason that in 
such a year the customer confines his purchases to the more staple articles, 
and articles of necessity bearing less profit to the merchant than the 
average of his wares, and while the merchant naturally will, by reason of 
the circumstances, apply as much greater profit as possible to other 
articles of better profit than the staple, enough perhaps to restore his pro- 
fit to the normal of other years, it would be difficult to overcome the 
stringent tendency sufficient to make an absolute advance over other 
years, and it is more than probable that it would not reach that of normal 
years by reason of these conditions, which should also be noted by the 
adjuster in his comparisons. 

It will be observed that the merchandise fires do not conveniently occur 
on the 31st of December, after the full year's experience is attained by the 
merchant, (fortunately, too, for the appearance of our annual statement 
and the peace of mind as well as the contingent of the manager), but the 
period is limited by the fire to so and so many months, and the compari- 
son should be limited to the corresponding months of the past year, the 
profits of which will often vary from the general average of the year. It is 
quite as difficult to say what have been the profits for individual compar- 
ative months last year, as for those individual months this year, but like 
causes will produce like effects, and if the conditions during the compara- 
tive month have been similar, we will be able by allowing for the causes 
of greater or less differing from these conditions of the succeeding months, 
difference of season or other conditions of trade, to satisfactorily arrive at 
conclusions as to the profits for the comparative period. 

A comparison of the sales and purchases of the corresponding period 
last year is also a valuable aid in approximating correctness of estimate of 
profits. If the sales have fallen off and purchases have not fallen off in 
similar proportion there is good presumption that profits have fallen off 
also. The merchant is not apt to "stock up" in the face of declining 
sales, and when he has perhaps drifted into this by anticipatory order- 01 






FIRE UNDERWRITERS' ASSOCIATION. 123 

mistakes in management, it argues not only slow sales but the extreme 
probabilty that they are made at reduced profit. It is true the surplus of 
purchases is on the shelves and will manifest itself when our calculations 
of the loss are complete, but meantime the one thing we are now seeking 
to arrive at is the percentage of advance profit in respect of the goods sold, 
and the paucity of amount of sales is indicative that they do not sell for 
what they should because of little demand, and the surplus of purchases 
is beginning to take on deterioration, departing from its invoice value will 
not sell at normal profit, and the margin is gradually narrowing between 
cost price and selling price to relieve the plethoric condition of the stock. 

In cases of abnormally slow sales and light purchases, showing little re- 
plenishing of stock, except perhaps of staples yielding low profit, stagnated 
trade and stock " running down," there is danger of over-estimating the 
ratio of profit if based on average of a previous year without close scru- 
tiny of the different affecting causes attending the present period, and dis- 
plays itself in the too large resulting inventory of goods, inconsistent 
with the probable low profits, and that inventory or result again valued too 
high, by reason of the stagnation causing a depreciation of articles, to be 
taken into account. This stagnated condition presupposes a lower ratio of 
profit for the reason that the articles under sale being slow of sale deterio- 
rate during the process of selling them, and must be sold at less than the 
normal profit if sold at all. 

Closing out sales may be a new feature with our merchants this year. 
Last year's and previous years' profits had not been affected by an occur- 
rence of this nature, by which the margin of profit on a considerable bulk 
of goods sold is reduced as compared with former years. If such a prac- 
tice has now been had it must be noted by the adjuster for the possible 
effects it will have on the average profits for the term. This may be mod-, 
ified to some extent by the active sale consequent upon it of other goods 
at normal or increased profits, but unless anticipated by the depreciation of 
his inventory at last stock-taking, whereby last year's percentage of profit is 
itself reduced below the actual on the actual goods sold, then the assump- 
tion is altogether a fair one that the sales have been made at some sacrifice 
of profit not restored by increased profit on other sales, and that conse- 
quently the percentage of profit is less than for the period we are compar- 
ing with. 

On the other hand, if the purchases for the period we are considering 
have been more favorably made than last year, or than the usual markets, 
by auction, or creditor's sale and the like, our merchant has reaped an ad- 
vantage which must be taken into consideration, and making due allow- 
ances for the naturally reduced selling prices of such goods, there still re- 
mains the very reasonable probability that his normal percentage of profit 
has been increased over those of the comparative period, by reason of the 
favorable purchases. 



124 FIFTEENTH ANNUAL MEETING OF THE 

And right here let me remark, that there i£ another possibility of favor- 
able purchase of goods, in the prosperous merchant able and accustomed 
to discount his "time bills," whereby he makes the more advance profit 
on the cost of the goods to him. It is important to discover if his discounts 
have been made to reduce the debit of merchandise account, the cost of 
purchases this year, as we may rind they have in former years, or if, in- 
stead, they now 7 constitute an independent element of business profit, and 
the debit to merchandise account remain normally invoice cost, for other- 
wise we might do ourselves the injustice of basing our estimate on enlarged 
profits over invoice cost, as compared with cash costs to him in former years. 
It does not matter in our comparisons with former profits, so long as the 
disposition of the discounts is uniform this year with last or former years. 

But in niy estimation the proper place for deducting the percentage of 
time discounts is from the debit side of the merchandise account (pur- 
chases), and from previous inventory, too, unless already done, instead of 
from the ascertained loss at invoice value. It is a transaction affecting the 
cost of the goods to the insured, or to anybody who pays cash for them, 
on which all the advance profit is made. It is proper it should be deducted 
from previous inventory, because this inventory includes, as compared 
with what outlay of cash is necessary to purchase the goods embraced in 
it, a partial profit already made (as to results the adjustment is arriving 
at), and forming a part of it, measured by the discount for time purchases 
being the difference between invoice price and cash invoice price. This, 
however, is a digression. I desired to allude to the considerable effect, in 
making estimate of profits, of omitting the deduction of discounts on time 
purchases, from the purchases for the present period under consideration, if 
it had been done in the former years with which we are comparing. 

The discounting of time bills is attributable to the general success of the 
merchant, and in practice is not frequently met with. 

Change of style and season affecting a line of goods, causing them to be 
either sold off rapidly at a reduced profit, or to remain in hands at a re- 
duced value, is akin to conditions brought about by stagnated trade. This 
is not so sensibly felt in the comparison with previous years' profits, as it is 
liable to enter in to each successive year's business in like proportion, and 
it is only when an abnormal condition is reached that its effects will be 
material. 

Under this head would occur fancy dress stocks and millinery stocks, on 
which the natural depreciation is considerable. In this connection I make 
another digression, to say that in such stocks, particularly millinery and 
kindred stocks, susceptible of a considerable natural depreciation by being 
easily affected by dust and handling and atmospheric changes, as well si 
by decline in style, we are apt perhaps to err in the other direction of mini- 
mizing a possible estimate of damage by the disordering conditions of a tire 
to so susceptible goods. Goods fairly sustaining a large ratio of deprecia- 



FIRE UNDERWRITERS' ASSOCIATION. 125 

tion while in stock, from wear, will naturally sustain a large ratio of damage 
by fire conditions, and it can be honestly and graciously so admitted in an 
adjustment. 

We have considered estimates made of profits, when books or previous 
records are at hand for comparisons. Estimates made in cases where the 
adjuster has no books or record of past experience, it is safe to say are in- 
variably too high. It is difficult to come to an agreement with the assured 
on what is in .such a case primarily a guess-work proposition, without 
making them so. Of course a sworn statement will supply the omission; 
but memory is so fleeting sometimes, and many times jDarol statement is 
depended on — both less satisfactory for justice to the assuring company 
than when the books can be made to tell their own tale, as a correct basis 
for present affecting conditions. 

In the absence of books the acumen of the adjuster comes in full play 
to obtain justice, and, what is an equally or more pointed occasion for 
the exercise of it, is in the case of books saved but able to tell no story. 
Most of us have had experiences of this nature, and it is safe to say that 
a merchant so indolent or careless in his methods is unable to keep 
regularity of ratio in his advance profit, and that his parol testimony 
concerning it is at best an uncertain quantity, or worthless, rendering 
necessary extraneous means for estimate or approximation. 

Other possible errors in estimate suggest themselves, needing care to 
approximate exactness, in the requirement to do even justice to both par- 
ties, and the tendency of such errors is at all times against the assuring 
company. It is so easy to be some hundreds of dollars out of the way on 
buildings in the estimate of cost of reconstruction or in depreciation for 
age. The builders' estimate should have the revision of the adjuster, and 
the matter of depreciation be carefulty considered in every instance, be 
neither the result of hazard nor of blind following of Tiffany, for there' 
are few cases met with to which the extremity of the rule may perhaps ap- 
ply; but these matters should be weighed, and the circumstances and con- 
ditions of each individual case be a law unto itself. 

I do not propose to tire you by any elaboration under this head — my 
article has already perhaps reached tiresome proportions — nor to more than 
allude to the estimate of depreciation of stocks, which is a fruitful field for 
exploitation and governed by many circumstances to be observed in each 
case. 

The points I meant to make, and to direct, in ever so feeble way, the 
attention of fellow adjusters to, are the value of scrutiny, weighing and 
comparison of conditions, in approximating necessary estimates to the 
fact if it were ascertained, instead of adopting previous results for pres- 
ent conditions, — and of narrowing the distance, by absolute reasoning, 
between the unknown quantity and the accepted result, between x, and Q. 
E. D., and the consequent limitation of possible extravagant variations 
from correctness. 

H. W. GRANT. 



126 FIFTEENTH ANNUAL MEETING OF THE 

Mr. Carpenter — I would like to do myself the pleasure 
of saying that I think that is the most thoughtful and 
best expressed paper that we have had read before the 
Association. (Applause. ) 

Mr. Sexton — I agree with Mr. Carpenter on that prop- 
osition. It is one of the best rounded, finished papers 
that we have had presented for many years. Mr. Grant, 
in his unparalleled way, calls attention to many subtle 
points in adjustments that most of us, I think, over- 
look in a great many cases in our practical experience. 
The points are subtle and they are elusive, and I think 
they have gotten away from us in many cases. They 
are very important, too, as we can easily see when we 
stop to reflect. 

Mr. Edwards — During my term as the presiding offi- 
cer of this Association, I was hunting around for gems 
to present to the meeting over which I should preside. 
I imagined that there was one in Mr. Grant, and asked 
him to prepare a paper the last year, and being asso- 
ciated with him, I managed to secure the paper which 
was published in the proceedings of the last annual 
meeting, and I was rather proud of the jewel I found. 
(Applause.) 

The President — Gentlemen, it is now ten minutes af- 
ter 12 o'clock, shall we take up another paper and pro- 
ceed? I see that Mr. Dutton, w T ho has the paper next 
on the list, is a witness in a law suit at the city hall, but 
I think we can have him read his paper this afternoon. 
Mr. Sexton is here and can give us his paper on "Forms 
of Policies," if you like, before we adjourn. It remains 
with the Association to state what they desire done in 
the matter. 



FIRE UNDERWRITERS' ASSOCIATION. 127 

Mr. Carpenter — I would suggest that we hear Mr. 
Sexton's paper now. 

Mr. Dornin — I know from my long association with 
Mr. Sexton that what he says is very brief and to the 
point. 

The President — I will ask Mr. Sexton to present his 
paper on " Forms of Policies " now. We shall be very 
glad to hear from him. There is considerable more to 
follow this afternoon, and furthermore we may need all 
the afternoon for other purposes. 

Mr. Sexton — Mr. Chairman and gentlemen. Nearly 
every gentleman who has got up here has made an 
apology for his paper, and I have got a paper that is an 
apology for a paper, so I won't make any apology. I 
was assigned to, or there was assigned to me, a ponderous 
subject. I took hold of it with the will of my friend 
Wetzlar, but not having his ideas and force, I dropped it 
early; consequently, you can just as well listen to this- 
paper before lunch as after. It won't take long, and it 
has the advantage of there being nothing in it to 
bother your brains over after I get through. 

(Reading.) 

FOKMS AND POLICIES. 

To the President and me?nbers of the Fire Underwriters' Association of 
the Pacific : 

Gentlemen — In a moment of weakness I promised our worthy and 
pushing President to write a paper on Policy Forms. I did not know at the 
time that a paper doing justice to this subject would take more time than 
you have to spare, and more ability than had by the writer. 

"Adjust the loss when you write the policy." 

If this idea were kept in mind while putting risks on our books, we 
would have less friction in settling losses, and fewer statesmen burning 
the midnight oil drawing up laws to regulate insurance companies. 

If our policy clerk had been careful in writing our policy on "bank 
furniture and fixtures," as he intended to cover, and as the assured wanted 
it, instead of on bank fixtures, the loss would have been settled without a 



128 FIFTEENTH ANNUAL MEETING OF THE 

jar, the adjuster would not have saved half of the face of the policy, the 
banker would have been paid for tables, desks, chairs, carpets and other 
furniture, on which he had paid a premium for insurance, and would not 
be ready to swear that the whole study of insurance men was to so write 
a policy that it would be void in case of loss. 

You will say that in such cases the furniture should be paid for, but 
how many of you will paj T for furniture under a policy covering on fix- 
tures . 

An agent writing such a policy probably did not know the legal defini- 
tion of fixtures, and concluded that any article used in fixing up a place, 
chair, desk or inkstand, is a fixture, but the adjuster is loaded for just 
such errors, and in taking advantage of the want of proper knowledge on 
the part of the agent, makes a salvage in coin, and insurance makes a loss 
in character. 

Our agent covered a 8500 stock with a 81,500 policy; we paid 8750 — saved 
8750 ( ?), and by our criminal negligence burned a building, a block, or a 
town, thus giving the people another cause to appeal to the law-makers 
for protection. 

We insure good property, good but not salable at half its cost, for full 
cost, or for as much as the broker wants and the owner will pay for, and 
when a lucky accident turns it into good paper, we squeal, kick, call the 
claimant bad names, and once in a great while invoke the aid of the courts 
to get us out of a scrape that nothing but pure negligence got us into. 
This may not have any connection with policy forms, but seems to fit in 
here, and you will all agree with me that the exercise of a very small per 
cent, of the care shown after a loss would, if taken in advance, save much 
work, and much coin. We have excuses without stint for our want of 
care. 

The assured is careless in making his contract because his property is 
fire-proof, won't burn — the agent believes so, to. The office force watches 
the class of risk, rate, and lines, no one being interested in the form of 
policy. 

.More care in wording the written portion of policies will pay. 

As to the printed policy forms, with the exception of the New York 
standard form, there are scarcely three alike. We have uniform practices, 
nniform rates, and uniform commissions, and why should we not use 
uniform printed forms of policy. A claimant having ten policies on his 
property, is liable to have ten different contracts to deal with, where there 
should not be more than one. 

We ask to have all written portions of policies concurrent, but fail to 
furnish a concurrent printed form. The instructions and provisions in 
many of the policies in relation to "proceedings in case of loss.'* in rela- 
tion to taking account of stock damaged, or undamaged, of selectiu 
agreeing on appraisers, or arbitrators, and umpire, and in getting at the 



FIRE UNDERWRITERS' ASSOCIATION. 129 

loss by appraisement or arbitration, are so mixed and mazy, that a bright 
lawyer can worry us, and when we do succeed in forcing a settlement to 
successful issue against opposition it is more because of a want of knowl- 
edge on the part of the claimant than of the merits of our contract. 

Having talked this part of the contract over, with many members of 
the " Ashes Brigade," and tried to frame a proper form, concluded that 
nothing less than a uniform printed policy form, a "Pacific Coast form," 
would be of any benefit, and I recommend that a committee of five or seven 
members be appointed by the President of this Association to report a form, 
that the committee have a proof printed at the expense of the Association, 
of such form as they agree on, and hand a copy to each coast manager and 
each member of this Association with a request for criticisms and sugges- 
tions, shall be considered by the committee on the final adoption of such 
form. Such "Pacific Coast form," if suitable for the purpose, need not be 
adopted by the State or the Compact, but would, if adopted by a half dozen 
offices, be popular with business men because having read the printed in- 
structions in one of them, they need not then read the others, and would 
not have as many different contracts as they hold policies. 
Respectfully submitted, 

WM. SEXTON. 

Mr. Kinne — Under this head, before we adjourn, as 
that seems to be the next idea, I would move that the 
suggestion made in the paper of Mr. Sexton, being of 
such a practical nature that it is worthy of considera- 
tion, that the President be authorized to appoint such a 
committee, that is, I move the adoption of his sugges- 
tion. Motion adopted. 

Adjourned until 2 p. m. 

AFTERNOON SESSION. 

February 18th, 1891. 
The President — Gentlemen, you will please come to 
order. I am very sorry that the members of the Asso- 
ciation did not observe my warning this morning and 
appear promptly at 2 o'clock. Now, inasmuch as we 
have considerable business before us for the afternoon, 
we better proceed at once, and the first paper will be 
that of Mr. Dutton, on the subject of " The Ills We 
Have.' 7 



130 FIFTEENTH ANNUAL MEETING OF THE 

THE ILLS WE HAVE. 

" And makes us rather bear those ills we have 

Than fly to others that we know not of. :> 

A year ago, in an unguarded moment, I promised a paper for this ses- 
sion. It wasn't much of a promise to make, either, for anybody ought to 
be able to prepare a paper in a year. Eleven months later I stumbled 
upon your worthy President (and my promise) just as he was asking a 
fellow delinquent for the subject of his paper. 

This gentleman, with the smoothness of an adjuster of non-concurrent 
policies, slid the responsibility upon me by proposing that I select the 
affirmative of some proposition and he would take the negative. I accord- 
ingly suggested what was then uppermost in my mind — that underwriting 
was beset by annoyances within and general cussedness without — and that 
he might claim that it wasn't. From the title of his paper, however, he 
must have beat a retreat in bad order from this proposition, realizing, no 
doubt, that in such a defense he would find himself following a jack-o'- 
lantern of falsehood over a quagmire of fraud, where not even the 
' Kinne rule " could discover a niggerhead of encouragement toward argu- 
ing the non-concurrent elements of our business into a symphony of 
good will and considerateness, and the underwriting bear garden, into an 
harmonious family of loving brothers. 

Although the proposal did not develop into an agreement, yet, as often 
as I think of my promise, the subject recurs to me with a persistency 
which excludes other and perhaps more available topics. So I have e'en 
concluded that, like the Ancient Mariner, I must " have it out " with 
this particular albatross. 

But, as I attempt to collect the ills and annoyances of our business into 
a decent and orderly (perhaps I should say mendacious and disorderly) 
list, which I may, with reasonable accuracy arrange into brigades, regi- 
ments, companies, platoons and squads, I find myself facing such an in- 
discriminate, unclassifiable and generally uncontrollable army of subjects, 
that I regret that I didn't begin the work ten months ago and attempt a 
rival to Bancroft's History. 

I shall therefore confine my paper to comments upon a few of the more com- 
mon disadvantages under which we, as underwriters, labor, and only wish 
that some Moses would arise, who would lead us out of this wilderness of 
annoyances and popular misconceptions into a promised land where un- 
derwriting could be properly regarded as entitled to as much considera- 
tion as the other branches of the mercantile system of which it forms an 
important part. 

I will pass the individual annoyances, the printer who improves on 
copy, the porter who shows us how to arrange the papers on our desk, the 
supply clerks who sends marine envelopes in fire agents' supplies, the 
mailing clerk who forgets to stamp the letters, who sends King's City cor- 



FIRE UNDERWRITERS' ASSOCIATION. 131 

respouclence to King's River, and Colfax, California, notices to Colfax, 
Oregon, who gets the wrong letter into the other fellow's envelope and 
who fails to enclose the check with the letter to the correspondent whom 
you wish particularly to impress with your methodical business habits. 
These are common alike to all and alike beyond remedy. Let him alone — 
he may get to be a manager himself some day, and thus time will bring 
its own revenge. Let us rather consider some of the ills peculiar to our 
business, and besetting us as a family rather than as individuals. 

The air is full of protest, and the legislature of bills against insurance 
combinations, compacts, rings and trusts, and yet there is probably no 
business on the face of the globe so thoroughly beset with competition 
and so open to it, as is ours. In it is the doctrine of free trade carried 
to its utmost. 

Insurance, unlike any other traffic under the sun, deals in a com- 
modity, the cost of which can only be estimated after the sale is made 
and the goods delivered. Accordingly, as a reasonable precaution the law 
requires, that, before a company shall be allowed to sell its promises of 
indemnity it shall set aside a capital of $200,000 or more and preserve 
same intact above its liabilities. 

Individual capital being subject to the fluctuations following individual 
business undertakings could not be handily held in trust for immediate 
payment when most needed (as, in case of a large loss arising), and the in- 
surance business therefore becomes essentially a corporate business, and 
as such not requiring individual capital on the part of those proseauting 
it, there are attracted to it many who, having lost their capital elsewhere, 
turn to insurance soliciting as the only business in which one can operate 
upon a capital of friends and acquaintances. 

Goaded on, then, by necessity in a life and death struggle for premiums, 
such agents could scarcely be expected to form material for trusts, refus- 
ing business unless at some exorbitant rate — in fact stockholders could 
not safely entrust a company's capital with such men unless a mini- 
mum limit were placed at which their concessions to secure business 
must halt. 

Now this material might be arbitrarily controlled at some high figure of 
premium if handled by a combination of a few local companies — so few, 
indeed, that each would be satisfied with its share of the plunder and not 
covet the share of its neighbor also — and the combination amply protected 
by law against outside competition. But how different from this is the 
actual condition. Our law even offers a premium upon outside competi- 
tion, for while the local company's sworn statement of its condition must 
be verified by an official examination of the books and assets, and the com- 
pany is taxed upon all its belongings, a foreign company merely files its 
sworn statement and pays a tax upon its office furniture, if it has sufficient 
to attract the attention of the assessor. 



132 FIFTEENTH ANNUAL MEETING OF THE 

Many of the other States impose some restrictions upon foreign com- 
panies to equalize the requirements upon locals and the result is that to- 
day more foreign companies are operating in California than in any other 
State in the Union. 

How unreasonable the popular claim is that these between one and two 
hundred companies could combine upon and sustain an unreasonably 
profitable tariff, is shown by three prominent facts: 

1st. The legal advertisements of all the companies, and the Insurance 
Commissioner's Annual Report would show large profits, and this would 
at once attract more competing companies until the business was whittled 
down to a bare living, and which is indeed its present actual condition 
as will later appear. 

2d. Many agencies are placed in the hand of agents working on com- 
mission, and as their incomes are proportionate, not to the percentage of 
profit made but the amount of business done, it is to their interest to 
secure all the premiums possible at any figure short of actual loss to their 
company which might cause a withdrawal of their agency. 

3d. The companies restricted to a purely local business, which, if the 
profits were large, should have paid large dividends, and grown rapidly in 
surplus have, as a matter of fact, been living for the past few years from 
hand to mouth, both their profits and dividends having been unreasona- 
bly small. 

These undeniable facts ought surely to convince any reasonable man 
that there must be something wrong in the unsupported charges of 
demagogues that the rates are too high. It is useless to attempt to con- 
vince those making these charges most loudly — they don't want to be con- 
vinced. Not long since I was talking with one of these gentlemen, — a 
reputable, intelligent, and somewhat prominent and withal ordinarily 
conscientious lawyer, — who was declaiming against the exorbitant dwell- 
ing rates charged in this city. " Three-fourths per cent.," said he, " f or 
an isolated dwelling is perfectly outrageous, and you underwriters know 
it. Sixty cents would be a plenty, and would leave you a fair margin of 
profit — statistics show it — you can't fool me." 

I said, " Suppose the dwelling rates were reduced to sixty cents, do you 
think you and the other complainants would be satisfied and stop growl- 
ing?" 

" Certainly," he replied, " but there is no danger of your ring doing it— 
they were not organized for that purpose." 

"Well, my friend," said I, "the rate has not been over sixty cents for 
the past ten years, and that same ring made reduction from even that rate 
long ago and the rate has been but fifty cents for the pa<t five years." 

"Yes," said he, without changing a muscle, "you rob us out of fifty 
cents right along when forty cents is all you ought to charge and you know 
it; you can't pull the wool over my eyes. Statistics will show it," and he 



FIRE UNDERWRITERS' ASSOCIATION. 133 

actually cancelled a three-year policy written at two annual rates sooner 
than submit to such extortion. 

Where a general agent is working on a commission which must pay 
office and living expenses, when business is dull and expenses large the 
fleeting premium will be anxiously pursued to the utmost limit where only 
his native conservatism or the fear of the loss of his company, following 
the loss of profit, compels a halt. 

The location of this line can only be ascertained by a comparison of re- 
sults of all the companies for a series of years and working upon the same 
general system of rates — otherwise the business becomes gambling pure 
and simple — a business in which no conservative investor would care to 
risk his money. 

This fundamental principle was recognized by the companies first locat- 
ing agencies here, before ever a local company was formed, for away back 
in 1857, the nine agencies then located here organized an association which 
paved the way for the organization in January, 1861, of the San Francisco 
Board of Fire Underwriters which has ever since continued. This Board 
was governed by a schedule of rates but only comprised a portion of all 
the companies operating here, the outside companies' rates ranging from 
ten or fifteen per cent, below tariff down to those who charged whatever 
they could get, depending upon luck for life. 

This continued until August, 1884, when the companies pooled their 
experiences and united in forming the Pacific Insurance Union, with a 
system of rates which was a compromise between the "Board" tariff and 
the more or less demoralized prices charged by those having no Board 
affiliation, hoping that the saving in expense by doing once for all what 
each had previously done separately would pay much of the reductions 
made in rate and there would still be left a moderate margin of profit for 
underwriters, and that the reduction in rate which the large majority of 
the people would experience, would incline the public generally to favor- 
ably regard the Compact. 

The public, however, rather incline to classify underwriters about on 
a par with the government, so far as unfair treatment is concerned. You 
know it is a part of the religion of the average citizen to swindle Uncle 
Sam on every turn, from dodging poll tax to smuggling in dutiable goods. 

I once detected a retired sea captain who prided himself on his integrity, 
in a contortion of the truth, and on charging him with it, he explained 
its innocence by exclaiming, " Why, that was nothing but a custom house 
lie." Only upon this hypothesis can I account for the peculiar statements 
that we frequently hear from merchants, loss claimants and others who 
would never think of uttering a falsehoodin their ordinary business trans- 
actions. 

Underwriters themselves are partly, and the inherent " cussedness" of 
human nature largely, responsible for this popular vein of unfairness — not * 

\ 9 



134 FIFTEENTH ANNUAL MEETING OF THE 

to say -untruthfulness — which appears to permeate the relations of the pub 
lie toward underwriters. 

Our Saviour's expression, "The poor ye have always with you," has a 
broader application than to money merely. The poor morally, causes 
vastly more trouble in this world than the poor financially, and we, of 
course, have our share of him„ and his presence encourages the insured 
to demand a reduction or threaten to "shop" his business; the broker to 
intimate broadly that he can "do better" elsewhere, and the crank to 
brand each lost risk as stolen from him by unfair means. The effect of 
this constant cry of "wolf " is to dishearten the despondent, irritate the 
contentious, relax the vertebrae of the weak-backed, lessen our confidence 
in one another, and confirm the public in the impression that they may 
fairly rob a profession whose members are constantly robbing one another, 
and, by inference, the general public, for what man's public protestations 
are believed whose private life plays Judas to good principles ? 

As a result, hostile public prejudice is engendered and all unite in throw- 
ing sand on the track along which the underwriter pulls his load. It is 
not easy for an insurance company to secure even justice from the average 
jury. A horde of newspapers expect to be conciliated with advertisements 
if they refrain from stirring up popular clamor by unjust criticisms, or if 
in mentioning underwriters they restrict themselves to telling the truth. 

The insured instead of giving the company the full premium for his risk 
nominates some friend whom he would favor, and who takes about one-sixth 
of the premium as commission. Some States require deposits, many cities 
licenses, and every community taxes premiums as heavily as its conscience 
will admit, and then all unite in a burst of virtuous indignation against 
underwriters for the heavy expense under which they run their business, 
and, stranger yet, the average man is honest in the conviction that it is 
the underwriter and not the community who is to blame for these expenses. 

Gossip has it that before each session of the legislature, designing men 
prepare bills of all sorts, more or less impracticable in theory, or unjust, 
expensive or injurious in their requirements if passed, not in fact really 
designed to ever become laws, but in the expectation that underwriters, 
fearing that the ignorant, prejudiced and ambitious, might unite in pass- 
ing these unjust measures, will pay tribute to secure their withdrawal 
(until the next legislative session), or prepared, if underwriters are not in- 
clined to advance "solid arguments " for the killing of these measures, to 
use all their influence to secure the passage of one or more, trusting at 
the next session to have their repeal purchased at even greater cost. 

With city, county and State levying licenses, taxes and expensive aud 
annoying requirements, brokers drawing commissions and trying to de- 
moralize practices, incendiarism and arson when times are hard, ignorance 
of the conditions of the contract on the part of the insured, and indeed 
frequently the equal ignorance of the agents to whom the companies are 
compelled to entrust the issuance of their policies, the carelessness (or 



FIRE UNDERWRITERS* ASSOCIATION. 135 

worse) of many of these agents regarding collections, the unwise enact- 
ments of legislatures, the persecutions of politicians, distrust within the 
ranks and persistent assault from without, truly an underwriter's life 
might be considered as scarcely a happy one. 

I have found, as I expected when commencing, that the subject was so 
broad and far-reaching that volumes might easily be written instead of 
pages, and then not half exhaust the subject, and again, but half one's 
work is done if he but announces the disease without suggesting the cure; 
and after all there is at least a partial cure for very many of the ills with 
which our body politic is suffering, if we will but apply it. We have 
spent much time and trouble in formulating laws to prevent, and providing 
penalties to follow, the commission of offenses which our primary obliga- 
tions should bind us in honor not to commit, and yet the air keeps just as 
full as ever of rumors of rate cutting and rebating, which, if true, cannot 
have been done in ignorance, and argues a moral tone among us which I 
am loath to admit. 

Nor laws nor penalties can prevent crime — they only make it disgrace- 
ful and drive it into deeper shadows. Not all the laws ever enacted can 
legislate a crooked man straight nor make one hair white or black in his 
moral character — he must himself reform his habits, if he would improve. 
If each of us would sweep his own sidewalk we should each find the whole 
street clean, and if each would for one month see that no deviation oc- 
curred in his office, we would be surprised to find that, by each minding 
his own business, we had solved the problem of regulating our fellows 
and starting a little millennium in our department of the community, 
and that is the only remedy which I can suggest or which I think exists 
for the cure of the ills which beset us. 

Its application is aptly described in the song which we have all heard . 
our friend Callingham render, and the chorus in which President Staples 
joins with heart and voice as if it were the doxology: 
Let each one learn to know himself, 

To gain that knowledge let as labor; 
Improve those failings in ourselves, 

Which we condemn so in our neighbor. 

WM. J. BUTTON. 

(Applause.) 

Mr. AVilson — I have listened with a great deal of pleas- 
ure to the paper that has just been read, and several pas- 
sages have struck me forcibly. It has often occurred to 
me that as an insurance fraternity we give to the pub- 
lic too many statistics. We place in their hands 
weapons against ourselves. The public, as a rule, fail 



136 FIFTEENTH ANNUAL MEETING OF THE 

to delve down to the bottom of these statistics, and take 
only the surface. Ratings prove a great deal. The 
average man who insures seems to forget that a mini- 
mum of rating, plus or minus, makes profit or loss. 
They seem to ignore the fact that the history of the 
companies that are now living, for the last twenty-five 
years, not counting hundreds of companies that have 
failed, have shown a profit of only 4.1 %, that is. their 
losses and exj>enses have equalled 95.9 % of their net 
premiums. We give to the public what our expense 
ratio is, what our loss ratio is, what interest we get on 
this, and what interest we get on that. The public at 
once think that the insurance companies are growing 
rich, the managers are lying back in their comfortably 
seated chairs, and that the public are being robbed. I 
think we make a mistake in giving the public too many 
statistics. 

The President — I want to say a few words in line 
with what Mr. Wilson has said. I am inclined to agree 
with him and, in fact, our experience has proven the 
correctness of his conclusions. You will probably all re- 
member that about four years ago we invited the daily 
press into our meetings. I think it was Mr. Lowden, 
who, at that time wrote a paper on statistics, and the 
next morning there appeared in one of the morning 
journals the same figures, but they were fearfully 
garbled — twisted around so that even Mr. Lowden would 
not be able to recognize them. It has often been said 
that figures do not lie, and they had the same figui - 
but somehow or other they did not mean the same 
they did when Mr. Lowden put them in the paper 
before us, and since that time it has been the rule of 
the Association to exclude reporters from our meetii p 

Mr. Dutton — Mr. Chairman, in the same connection] 






FIRE UNDERWRITERS* ASSOCIATION. 137 

it has occurred to me often, that we give the public the 
wrong kind of statistics. I do not know exactly how 
we can remedy it. a- there seem- to be a system, 
all over the United State- at least, of following out 
the classification of business in the same general way; 
but it seems to me that when a premium of. we will - 
one hundred dollars, shown in the policy, reaches the 
underwriter as eighty-five dollars, and the e lea of 

taxes, and licenses, matters of that kind, are erased, be- 
fore it arrives in his hands - :hat really he does not 
have the handling of more than mavbe §75 of it in the 
way of paying office expenses and losses, and providing 
reinsurance reserve that there is a margin of 

about twenty-five per cent, which the public assum- 
be clean profit to the underwriter, but which never 
reaches him at all. which is in excess of the actual 
amount received by underwriter. And if there could 
- -tern arranged by which the statement would 
show, or the tabulations would show $75 as the amount 
received by underwriter, and then the assessments 
made against that, of office expense, and the other vari- 
ous expenses and of reinsurance reserve, we would find 
that, instead of a forty or forty-five per cent, loss ral 
it would be sixty: and instead of the newspapers show- 
ing about sixty or sixty-five per cent, for the whole 
amount that, according to their showing, underwi ; 
pend on a hundred dollars received, they would be 
more likely to show ninety, or even ninety-three or 
ninety-four per cent. 

The President — While I may be a little severe in my 
judgment of the newspapers, it seems to me that until 
we can materially reform this sentiment, and I might 
MLy, the integrity of the newspa] s ia 

them no figures at all; even if vou can have the figures 



138 FIFTEENTH ANNUAL MEETING OF THE 

based on the $75 proportion, which has just been illus- 
trated, I think they would find a way of twisting it around 
to suit themselves. I think that the remarks that have 
been made, have been made upon the figures that have 
been published by the insurance commissioners. 

Mr. Carpenter — It is not a question of whether we 
w r ill, or won't, furnish the figures. We have got to 
do it. 

Mr. Dutton — They are collated in the Insurance Com- 
missioner's office by the newspapers generally. 

Mr. McLellan — A little while ago a paper in my town 
had a strong article in favor of the mutuals, urging the 
Legislature to pass a law authorizing the establishment 
of mutuals. And it declared that if they would only 
take the law that prevails in the State from which the 
editor came, insurance companies would be stronger 
than they ever had been before. The very next day I 
saw that three of the mutuals in that very State had sur- 
rendered; given up the ghost. 

The President — Gentlemen, this morning, upon Mr. 
Sexton's finishing the reading of his paper on " Forms 
of Policies," a resolution was passed that the President 
should appoint a committee to take the matter in hand, 
that is, the matter of preparing a uniform policy form 
for this coast. I have got the names of the committee 
here. I have named Col. Kinne, Mr. Carpenter, Mr. 
Lowden, Mr. Sexton, Mr. H. M. Grant, Mr. Belden and 
George Grant. I think they are representative insur- 
ance men, and representative members of this associa- 
tion. In that connection I want to say however, that 
it occurred to me, after the paper was read, and after 
the motion was put and carried, that you may encounter 
some difficulty in the fact that many of the offico here 



FIRE UNDERWRITERS' ASSOCIATION. 139 

have policies furnished them from the home office, and 
that they are not permitted to print their own policy 
blanks on this coast. However, I believe that if o^ie- 
fourth, or one-third of the companies operating here, 
could be induced to adopt some standard form, it would 
do lots of good, and I think that after a while the other 
offices could be made to see the wisdom of the course 
and adopt them also. 

The next paper on the programme is one by Mr. J. T. 
Trezevant, of Texas. Mr. Trezevant promised me that 
he would write a paper, and I think you will agree with 
me that had he done so we would have had a treat, but 
his promise he was unable to make good, apparently, be- 
cause the paper has not reached here; neither has Mr. 
Trezevant, and for that reason, we will have to pass it. 
After that comes " California's Conflagrations Climatic- 
ally considered," by Mr. Carpenter. We will call on that 
gentleman now. 

Mr. Carpenter — Mr. President, and Gentlemen: I am 
not going to make any apologies for my paper, because 
I think it will be entirely satisfactory. (Laughter). It 
is satisfactory to me so far as the beginning is concerned 
on account of the quaintness of the title. I think it will 
be satisfactory to you, so far as the end is concerned, 
because the end is so near the beginning. 

CALIFORNIA CONFLAGRATIONS CLIMATICALLY CONSIDERED. 

In this paper I purpose referring briefly to the influence which our cli- 
mate has upon the fire hazard: 

From the underwriting point of view, the most prolific production of 
the glorious climate of California is that friend of the w T ell-insured, un- 
successful merchant — the tramp. With the canopy of Heaven for his only 
roof, and "God's green (or snuff-colored) earth," the only carpet beneath 
his feet, a poet could easily picture him as one of Nature's noblemen, but 
the mercenary underwriter does not so regard him. Per contra, he looks 
upon him as one who perverts the balmy air of California to the nefarious 



140 FIFTEENTH ANNUAL MEETING OF THE 

use of furnishing breath whereby to purify a blood made up, as regards 
original packages, from cold sandwiches, beer-drainings and rescued cigar- 
stumps. 

The California tramp, while possessed of the general characteristics of his 
genus in other portions of the globe, has, thanks to a climate which en- 
ables every product of the soil to attain to phenomenal proportions, a full- 
ness of development and a plethora of production not elsewhere attained. 
He is a perennial beauty. No nipping frosts retard his progress, no bliz- 
zards freeze his limbs, and no prospect of rigorous winters ever compels 
him to seriously contemplate a permanent abiding place, and — work. His 
pathway, soft with dust in summer and with mud in winter, ever leads to 
the convenient haystack, shed or barn, whose shelter from sun or rain is 
all that is required. The same hazard attaches to his occupancy of these 
places as in other portions of the world, with the difference that here said 
hazard pertains during the entire year, and also in more numerous in- 
stances than elsewhere, on account of the favoring climatic conditions 
which augment the crop of tramps. 

The tramp element in California is like an army foraging in the country 
through which it passes, with no base of supplies and no winter quarters. 
It is so numerous that it can, upon occasions, "run a town" or burn it, 
thereby securing such supplies as its commissariat may require. Some- 
times, indeed, the California tramps, traveling in groups, closely resemble 
in character the bands of brigands such as are fostered by the similar cli- 
mates of Mexico and Italy. It seems, therefore, that the tramp hazard, 
the features of which are so evident to all that they need not be particu- 
larized, is, thanks to the climate, greater here than in any other portion of 
the United States. 

A taste for alliteration prompts me to mention next, after the "ever- 
blooming bums," the deciduous booms that have been recently shedding 
their leaves in all portions of the State. A California boom is an inven- 
tion for selling to those who have a mania for the semi-tropics, solid 
chunks of climate, resting upon an adobe foundation. The foundation 
doesn't cost much, but the superstructure of climate is proportionately 
more expensive, by reason of its great height. 

An essential portion of the California boom-making is the erection of 
hotels and other buildings for photographic, lithographic and exhibition 
purposes. They are like a lot of theatrical scenery, propped up for the 
purpose of giving an idea of reality to the play which is being enacted 
upon the stage. The outsider is like the theater-goer, who sees the litho- 
graphs on the fences and the photographs at the door, and concludes 
will go in. He deposits his money, he selects his lot and block (I should 
say, seat and tier), and sees the show. His emotions of expectancy, hope, 
faith, joy, meditation, doubt, despondency and declamatory profanitj 
successively worked upon, and the lights are put out before he has time 



FIRE UNDERWRITERS' ASSOCIATION. 141 

to reach the street, where a driving rain-storm promptly reminds him that 
he has left his umbrella at home, and that the nimble car-fare nickel is in 
his other breeches-pocket. Those who have invested in climate at boom 
prices will recognize the parallel. 

Now, all this " scenery," in the similitude of hotels and other buildings, 
ceases to be used for the "show" purposes for which it was originally 
erected as soon as the boom season is closed. Land enough has been sold 
to reimburse the manipulators for all their outlay, and leave a profit be- 
sides, so that if the building should now be burned, the insurance col- 
lected would be added to the profit account. The fact that a building 
cost |40,000 does not always entitle it to be insured for $1,000. The case 
is frequently similar to that of elegant quartz mills, which, after the mines 
have been sold and proven valueless, are not worth the cost of their plans 
and specifications. 

Of course the prudent underwriter should avoid these boom risks; but 
the trouble is to know where to draw the line between risks which are 
erected on boom, and those founded on bed-rock. He can either decline 
business in what at the time appears to be the most prosperous 
portion of the State, or accept the climatic boom as one of the exceptional 
hazards of California, that must be covered by the rate. 

" Climatic Construction." I am certain this is not a proper title, but am 
sure it will, in two words, call to your mind earthenware chimneys, stove- 
pipes through roof and sides, faulty grates, flimsy frames, and many sim- 
ilar characteristics of California buildings. The defects referred to exist, 
of course, in other portions of the country, but the necessity for substan- 
tiality is, on account of the climate, so much less here than elsewhere, that 
they are exceptionally prevalent in California. 

On the other hand, it may be said that there is so much less use for 
fires here than in other portions of the country, that the hazard is de- 
creased. My own belief, however, is that buildings substantially erected, 
with the expectation that many fires will be used, are better risks than 
those in which it is expected that but few fires will be needed, and where 
the heating and cooking arrangements are, accordingly, of a slight or 
temporary character. I would rather insure a house with half a dozen 
good brick chimneys, used every day in the year, than one which used 
fire only one month out of twelve, and shoved a stovepipe through the 
roof as a temporary expedient, "just during the cold snap." 

The Dry Season. The exceptional hazard pertaining thereto is self-evi- 
dent. Six months or more without a drop of rain, during which water- 
works run dry, and every nook and corner of roofs and back-yards is filled 
with tinder-like filaments of superheated litter and rubbish, create condi- 
tions that so swell our summer loss records, that forty per cent, of the 
losses of the year occur during the months of June, July and August. 

The Migratory Tendency. The climate is such that a large proportion 



142 FIFTEENTH ANNUAL MEETING OF THE 

of our population, who are far from being tramps, are nevertheless of 
what I may perhaps be allowed to call a semi-migratory disposition, that 
is they locate their homes in a tentative way, the climate being such that 
they can make their living arrangements in the cheapest possible man- 
ner, and then, if disappointment follows, can " strike out " for some other 
location. Homes do not need to be prepared with a view to that degree 
of permanency which pertains in colder latitudes. A farmer settles down 
in a house costing .$500, and with a barn costing $1,000, both constructed 
with a view to enclosing as much climate as possible, with a minimum 
of lumber. Malaria seizes him, or home-sickness his wife, or the sheriff 
the ranch, or a desire to get away " on general principles" the whole 
family, and the property burns. Many of you have records of such fires 
on your loss books, 

I use the farmer only as an example. The same migratory disposition per- 
tains to the merchant, so that the hazard of the "Transient Trader" 
(which finds entry on most Prohibited Lists) attaches to many merchants 
in California that are not generally considered " transients." 

The Grain Field Hazard. Were it not for this we should not, of 
course, be able to do a growing-crop business, but the fact that this is the 
only portion of the United States in which this hazard is so pronounced 
as to demand insurance, is a very practical proof that the character of our 
climate is such as to greatly augment the danger from fire. Where the fire 
hazard is, by the climate, so far increased as to render it desirable to in- 
sure property which in other sections is left uninsured, we may reasona- 
bly assume that this hazard is to the same extent increased on property 
which is insured in other portions of the country, and that higher rates 
than those elsewhere charged are in order. 

Spontaneous Combustion and Evolution of Vapors. That the climate 
materially increases the danger from these sources is self-evident. A 
bundle of closely confined oiled rags would burst into flame more quickly 
on a red-hot Red Bluff day than when under a Seattle sun, and coal oil 
of 110 degrees fire test becomes an inapproachable incendiary under San 
Joaquin's "115 degrees in the shade." 

Coal Oil and Gasoline Stoves. The character of the climate, which re- 
quires only a small quantity of heat for short periods, renders the use of 
these incendiaries more prevalent than elsewhere, and the loss ratio is 
proportionately augmented. 

But after all that can be said concerning the increase of physical hazard 
consequent upon our climate, I feel that the effect upon the moral hazard 
is still greater, and that the tramping, lawless, migratory spirit which can. 
all the year round, take advantage of our semi-tropical conditions, is re- 
sponsible for the greater portion of our "climatic" conflagrations, and 
the consequent necessity for making insurance "rates higher than in the 
East." 

E. W. CARPENTER. 



FIRE UNDERWRITERS' ASSOCIATION. 143 

The President — Gentlemen, there is food for reflection 
in what Mr. Carpenter has had to say. Notwithstanding 
the alliteration in the title, he mentions a good many facts 
that are very good amunition for the special agent and 
the local agent in combating the claims of the assured. 

This State is settling up very fast with a class of East- 
ern people who used to insure back East, and they are 
continually referring to the rates they pay there. You 
frequently meet a man here w^ho tells you that he used 
to insure his dwelling back there for tw r enty-five cents 
and he cannot understand why he should pay sixty 
cents here. And I think if the average local agent 
or special agent will remember the causes given 
here by Mr. Carpenter, he will go into the field better 
prepared to combat this idea of the assured. In that 
way the paper is, it seems to me, a valuable one. 

Mr. H. M. Grant — Mr. President, Mr. Carpenter's 
paper is an excellent one, and I think he has covered 
the ground very thoroughly in his paper — but I think 
he could have said something more about climatic con- 
struction. I discovered, on several trips in the San 
Joaquin Valley, a tendency to have many openings in 
brick buildings, draughts, light and air-w r ells, furnish- 
ing excellent opportunities for starting fires — so built 
because of the necessity of comfort by day and night. 
I think the fires are, perhaps, as much attributable to 
that as to the migratory habits of so many through the 
valley. 

The President — Are there any further remarks on 
Mr. Carpenter's paper? — if not, w r e will call on Mr. Low- 
den to present his paper on " The Measure of Manufac- 
turer's Damage." 

Mr. Lowden — (Reading): 



144 FIFTEENTH ANNUAL MEETING OF THE 

THE MEASURE OF MANUFACTURER'S DAMAGE. 

That a considerable degree of uncertainty regarding this subject prevails 
in the minds and is exhibited in the practices of Pacific Coast adjusters, 
can be easily ascertained by submitting the question: " What is the extent 
of the liability of a company under the present standard form of policy on 
a manufacturer's completed product?" The answers will be found both 
varied and unsatisfactory. 

It will be readily admitted that this uncertainty should not exist, as 
there is perhaps no question in adjusting of greater importance (financially) 
to the companies than the one under consideration. 

The amounts at risk are usually heavy, and an error assumes a serious 
character because of the magnitude of the sums involved, consequently the 
adjuster should be thoroughly advised regarding the measure of damages 
guaranteed by the policy and sustainable in a court of law. His mind 
should be clear on every question of liability under the contract; he 
should know exactly the extent of this liability, and his knowledge should 
be founded on facts, not opinions. To pay no more than the loss is good 
adjusting; to pay less, except for cause, is poor. 

In my examination of those decisions of the courts which bear upon the 
subject of the manufacturer's loss, I have been led to certain conclusions, 
which are advaneed herein as personal opinions only; they are not to be 
considered by any means as final judgment, but are submitted to the mem- 
bers of this Association in order that interest in the subject may be 
aroused, and that discussion may follow. 

To the direct question, "what is the measure of damage on manufac- 
tured goods in the hands of the producer?" the answers I 'have received 
manifest a decided leaning toward bare cost of production, viz: cost of 
material, plus labor, expenses and interest on plant. 

This conclusion is partially supported by Griswold (sec. 1695 of Text 
Book), but it is the only support I can find. He says: "For manufactured 
goods in the hands of the manufacturer the cost of production at the 
time of the fire, exclusive of profits, the value of the raw material, with 
the addition of the cost of converting into the manufactured articles, 
without any addition for interest on capital employed either in plant or 
machinery, is the cost of production." If he means that this is the meas- 
ure of damages (and the context clearly justifies this inference), he is 
presumably in possession of decisions which sustain such a position. It 
is to be regretted that he did not quote them, as a careful search has failed 
to reveal to me anything in harmony with his view; on the contrary, so 
far as I can discover, the courts look upon cost of production as having 
no bearing whatever on the extent of the loss, the value of the goods, or 
the measure of damage. So completely is it ignored that in a case where 
manufactured goods were, at the time of the fire, worth less in the market 
than the cost of production, it was decided that the market value, and 



FIRE UNDERWRITERS' ASSOCIATION. 145 

that alone, properly represented the amount for which the company was 
liable. Following is a digest of this decision: 

In a case involving a loss on reaping machines, the evidence showed 
that on account of defective principles the machines were valuable only 
as so much wood and iron. The Court instructed the jury that "the 
cost of construction, and before it was tried in the field, would be the 
measure of damage." Upon appeal this ruling was reversed, and it was 
held that such instruction was erroneous, and that the measure of damage 
was that agreed upon in the policy, to-wit, "the actual cash value at the 
time of the loss or damage." What it would cost to replace the machines 
did not furnish the rule for the damages which the company must pay to 
make good the loss. 

Commonwealth Ins. Co. vs. Sennett, 37 Penn. St., 205. 
It would perhaps be wise before proceeding further in our investigation 
of the subject, to look at those conditions of the New York standard form 
of policy bearing directly thereon. They are as follows: 

"This company shall not be liable beyond the actual cash value of the 
property at the time any loss or damage occurs, and the loss or damage 
shall be ascertained or estimated according to such actual cash value, with 
proper deduction for depreciation, however caused, and shall in no event 
exceed what it would then cost the insured to repair or replace the same 
with material of like kind and quality. It shall be optional, however, 
with this company to repair, rebuild, or replace the property lost or dam- 
aged with other of like kind or quality." 

Reinstatement of the assured in the condition he was before the fire 
(to the extent of the policy) is here made clearly obligatory, while replace- 
ment of the property destroyed is optional. 

Reinstatement of the assured should not be confounded with replace- 
ment of the property. The former is the underlying principle of indem- 
nity, which is defined as security against loss or damage, while the latter 
is merely a saving clause in the policy, intended to protect the company 
in the event of over insurance. The assured then may be legally rein- 
stated in two ways, either by a payment in money, or by the replacement 
of the property itself, but reinstatement in one form or other must fol- 
low the loss. 

Assuming, then, that reinstatement of the manufacturer is compulsory, 
while there exists no obligation to replace the property, the question we 
are called upon to decide is, what sum of money is necessary to accom- 
plish this result? 

If we make answer that the cost of production will reinstate him, the 
courts will not sustain us, for the reason that no where in the policy is 
the cost of production made the limit of liability. The words "what it 
would then cost the assured to repair or replace," cannot possibly mean 
what it would cost him to produce, and beyond these words nothing in 
the conditions has any bearing on the question. 



146 FIFTEENTH ANNUAL MEETING OF THE 

The limit of liability is clearly stated, "the loss or damage shall be 
ascertained, or estimated according to the actual cash value," and as cost 
of production is not necessarily the equivalent of cash value, the conclu- 
sion seems unavoidable that the adjustment of a loss on any basis except 
cash value, would not be a compliance with the terms of the contract, and 
would not, consequently, be sustainable in a court of law. 

If on the other hand, market or cash value is claimed to be necessary 
for reinstatement, we are at once met with the objection that a profit is 
involved for which, under the policy, we are liable — this profit being 
measured by the difference between cost of production and market value. 
That fire insurance companies are not liable for loss of profits under the 
ordinary policy, unless they are specifically insured, is a well established 
rule, for example: 

" Id enmity is the fundamental principle which lies at the basis of the 
the contract, and it can never, without violence to its essence and spirit, 
justly be made by the assured a soi. ~>f profit." 
May on Ins., p. 2. 

The general principle that the as crs are bound to adjust a loss upon 
the principle of replacing the ass 1 as near as may be in the situation 
they were in before the fire has r been understood to extend to the 

profits or fruits which the latter / s drawing, or might have drawn, from 
the thing insured. Y 

Leonarda vs. Phot ' [• . . Co. of London, 8. C, Louisiana, 2 
Robinson, 1 ,x. 

Profits are a legitimate subje ?i insurance under a fire policy, but they 
must be specifically insured. Expected profits cannot be claimed as a 
legitimate part of the loss under the ordinary contract. 
Niblo vs. N. A. Ins. Co., 1 Sandf. (N. Y.), 551. 

Since profits are clearly not insured, unless specifically covered, and 
since the payment to the manufacturer of the market value of his goods 
would quite as clearly include a profit, there must be some explanation of 
the repugnancy which exists between the decisions of the courts denying 
liability for profits in one case, and commanding the payment of market 
value in another. An explanation can only be found in the assumption 
that the courts do not look upon the difference between cost of production 
and cash value as a profit, and to a limited extent, I think, this view is 
correct. 

Has not the manufacturer who devotes his time and talents, in addition 
to his capital, in the production of an article of merchandise, earned his 
profit when he has turned out the finished product? If so, does not this 
fact change the character of the profit from an expectant to a realized one, 
and does not reinstatement require that this should be paid? 

To the cost of material and labor a proper addition for time and knowl- 
edge spent in production is necessary to give indemnity to the assured, 



FIRE UNDERWRITERS' ASSOCIATION. 147 

and the sum to be added is measured by the difference between cost of 
production and market value. 

A few examples for illustration: We will presume that the claimant is a 
lumber manufacturer, and the loss is on his manufactured lumber. In 
order to place this in his yard ready for the market, he has during the pre- 
ceding winter laid his plans, and spent time and money in procuring logs, 
following this he has spent his whole season, as well as a certain amount 
of money, in sawing these logs. In the fall a fire destroys his lumber 
yard, and the fruits of a whole j-ear's labor is in ashes. Can his loss be 
measured by the money actually spent in manufacture? Has he not 
earned a profit for which we are liable under a contract which compels us 
to pay the cash value of the property. 

Presume a cannery loss: The canner has, during the spring, made 
arrangements for purchasing to the best advantage sufficient fruit to 
supply his cannery for the season; later, he has purchased this fruit, and 
in due course has put it in cans r i;ases ready for market. Is his loss 
measured by the cost of product 9 Can we successful^ combat his 
claim for remuneration beyond thio st? Is not his time and knowledge 
of the business to be paid for? Th ason has passed, and he is totally 
unable (and so are we) to replace t> goods for less than the market 

value. Is not the so-called profit the. h.e exact measure of the value of 
his time and knowledge in canning tht . If so, it is not profit at all, 

but a valuable increment for which we ? 

It is well known that we must take cu* ideration appreciation as 

well as depreciation of the value of hu ;>handise in making an adjust- 
ment. We have all done this, and its justice is never questioned. A 
merchant buys one thousand blankets at $4, holds them for a rising 
market, and at the time of the fire they are quotable at $5. What value 
do we put in the proofs? Five dollars, of course. This is clearly a profit, 
but like the manufacturer's, it is earned, and we pay it. 

A careful reading of the decisions on the non-liabilitj 7 of insurance 
companies for profits will demonstrate that in every case the claim was 
made for something expectant, something not earned; it was a claim for 
a sum of money which was only due the assured at some future time, 
and on the performance of some contemplated act. Looking at the decis- 
ions in this light, the apparent inconsistency of [the courts in allowing 
the manufacturer a profit is explained. 

As we are liable then according to the conditions of the policy for the 
actual cash value of the property, it is well to inquire what is meant by 
this term. I quote from Griswold: 

Sec. 1693. " Value may be defined as of two classes, value in use and 
value in exchange, or the worth of an object in purchasing other goods; 
adjustment values always have this latter signification. 

"Asa general rule the market, value of any article covered by a fire 



148 FIFTEENTH ANNUAL MEETING OF THE ' 

policy is what it could be sold for, and since its value must be proven, 
it does not appear what other value than this could be shown. 

••Market value is adopted as a rule, because it exactly represents the 
amount of injury suffered by furnishing the value in exchange for which 
the damage or loss can be replaced or repaired." 

Sec. 1694. "Cost is not always value. Property may be actually 
worth much less or more than it cost. Present value is the figure sought. 
" If goods have risen in value, the payment of the cost price would be 
no indemnity, while if the value of the goods had depreciated in the 
market * * the original cost would be no criterion of present value." 
Here is a decision defining the meaning clearly. By actual cash value 
of goods is meant the money which the goods would have brought at the 
market price at the time of the loss and in the place where the lo-^ 
curred, considering their character, quality, and any other circumstances 
bearing on the question. 

Mack & Co. vs. Lancashire Fire Ins. Co. et al.. Y . S. C. C, Mo. 9 
Ins. L. J., 681. r 
The cash value may be safely set down then as the value in the market, 
and not the cost of the goods, although the latter may be greater or le-- 
than the market value. 

We will now look at a few decisions bearing directly upon the measure 
of manufacturer's damage. They are entirely harmonious, and all aim to 
give the assured the largest indemnity within the terms of the policy. 

(Whether the courts are not in error, and whether they have not been 
granting a greater indemnity than that contemplated by the compa: 
and that to which the assured is properly entitled, we will question lat< 

If goods were those which insured dealt in at wholesale, or manu- 
factured, the price for which similar goods were generally sold by whole- 
sale dealers or manufacturers, may be considered by the jury in estimat- 
ing their value, in an action upon a policy to recover for their lost 

Hoffman vs. .Etna Ins. Co., 1 Robert, N. Y., 501: S. C. 19, A 
Pr., 325; affirmed 32 N. Y.. 405. 
The measure of damage is the amount of actual loss as measured by 
the value of the property at the time and place of kiss. 
Savage vs. Corn Exchange Ins. Co., 36 N. Y., 655. 
American Ins. Co. vs. Griswold 14 Wend. N. Y. . 399. 
Hoffman vs. Western M. & F. Ins. Co.. 1 La. An., 216. 
The original cost, or cost of reproduction, is no necessary element of the 
value. 

Carson vs. Marine Ins. Co., 2 Wash. C. C. V. S. . 168; 
Commercial Ins. Co. vs. Sennett. 37 Penn. St., 205. 
iEtna Ius. Co. vs. Johnson, 11 Bush. (Ky.), :,s> ~ 
The rule of damages is the value of the property lost and not the i 
of replacement. 



FIRE UNDERWRITERS' ASSOCIATION. 149 

Steward vs. Phoenix Ins. Co., Sup. Ct. (N. Y.); 8 Alb. L. J., 265; S. 
C, 5 Hun., 261. 
The measure of damages is neither the value of convenience, nor of 
affection, nor the cost price, but its fair cash value in the market, to be 
determined by what similar property at the same time, and in the same 
or similar places, and under the like circumstances would ordinarily 
bring in the market, without regard to an extraordinary price whether, 
higher or lower, which might be obtained in special cases or under special 
circumstances. 

Mack vs. Lancashire Ins. Co. C. Ct. (Mo.), 9 Ins. L. J., 681. 
Equitable Fire Ins. Co. vs. Quinn, 11 S. C, 170; post, Sec. 428. 
Wynne us. Liverpool, etc., Ins. Co., 71 N. C, 121. 
The market value of goods insured at the time and place of the tire is 
that which assured losses by the fire, and is the measure of damage. 
Fowler vs. Old North State Ins. Co., 74 N. C. 89, 1876. 
An insurance company is liable to a party whose stock in trade is in- 
sured by them for the actual market value of such stock at the time of the 
loss by tire, and not for the cost price thereof, or the sum which it may 
have cost the party insured to manufacture such stock, notwithstanding 
that the'assured had not insured his profits upon the subject insured. 
Equitable Ins. Co. vs. Quinn, 11 L. Can. R., 170. 
These decisions certainly display the determination of the courts to 
grant the assured " all the law allows," and whether this is not more than 
the law should allow is a question we will now discuss. 

As before noted, the policy makes reinstatement of the assured in the 
condition he was previous to the fire obligatory, while replacement of the 
property destroyed is entirely optional with the company. Now, replace- 
ment as a means of reinstatement is, of course, only resorted to when 
that method is the cheaper, and is never used when the cost to the com- 
pany would exceed a money indemnity. It is therefore quite within the 
possibilities that replacement of the property, while nothing more than 
reinstatement of the assured, would be an excessive demand upon the 
funds of the company. 

The replacement of a manufactured stock can seldom be profitably re- 
sorted to, but when it is, the assured is exactly in the same condition in 
which the fire found him. The company has purchased the goods in the 
open market at market prices, and delivered them; the assured is in pos- 
-ion of a stock similar to the one he lost, and the indemnity is com- 
plete. But has not the company paid more than its contract requires ? 
I think it has. In purchasing and replacing the goods, the company has 
paid to another manufacturer a profit for which it is not liable, and a 
money indemnity to the assured should be less expensive to the company 
than the cost of replacement by just the amount of this profit. 
10 



150 FIFTEENTH ANNUAL MEETING OF THE 

Without "losing ourselves in the subtleties of interpretation," let us 
try to make this clear. In every manufacturer's business the realization 
in dollars and cents of the value of his product marks the completion of 
his work as a manufacturer, and until this is done his entire profit is not 
earned. When the finished product is stored in factory or warehouse, he 
has made good headway toward realizing this profit, but until the goods 
are sold, and the cash is in his possession, he has not finished his jour- 
ney. The fire finds him part way on the road, and had it not occurred, 
he would, in the ordinary course of business, be compelled to spend a 
certain amount of time and money before he could come into possession 
of what the Courts force us to pay at once, viz.: the market value of his 
stock. 

In allowing the manufacturer the market value of his goods, I modestly 
think the courts err. In no other way, except as the result of a fire, 
could he realize cash returns for his goods without the expenditure of cer- 
tain time, trouble and money. Is not the assured, therefore, profiting to 
this extent by the fire, and is this not a violation of the principle which 
underlies the contract, viz: that "it can never without violence to its es- 
sence and spirit, be made by the assured a source of profit? " 

The condition of the manufacturer with his manufactured product in 
warehouse, is exactly in the condition of a retail merchant with a stock 
in his store. They have both spent money and time in procuring the 
goods, but in order to realize upon them each must spend more time and 
money. We pay the merchant the retail price of his goods less what? 
less his expenses and the value of his time in disposing of them, and this 
we call profit. Why, then, should we pay the manufacturer the market 
or selling price of his goods, when in the ordinary course of business he 
could not realize this figure without additional expense; this expense is 
certainly a proper deduction from the market price. 

If under the contract and the decisions of the courts we are compelled 
to pay accrued profits, we should not therefore be obliged to pay for 
profits not accrued, yet I am unable to find in any decision the slightest 
recognition of this important point, unless the following may be deemed 
to have an indirect bearing upon it. 

Where distilled liquors ready for market, but upon which the internal 
revenue tax was not paid, were destroyed, it was held, that as the duty 
had not been paid, and the destruction left the owner without any per- 
sonal liability to the government for the tax, though while the property 
was in existence there was a lien upon it in favor of the government, the 
assured could only recover the value of the property 7 less the tax. 
Security Ins. Co. vs. Farrell, Sup. Ct. (111.), 2 Ins. L. J., 302. 
Bobbitt vs. Liverpool, etc., Ins. Co., 66 N. C, 70. 

While this does not quite cover the point, it shows an effort to get at 
the true loss. Since the assured was not liable for the tax and would not 






FIRE UNDERWRITERS' ASSOCIATION. 151 

have to pay it. the company was under no obligation to include the 
amount thereof in the adjustment. A parallel case would be loss on hay 
in a warehouse. Perhaps hay is not strictly a manufactured article, but 
for the purpose of illustration let us assume that it is. We write 100 
tons in warehouse and it bums. The market value is 810 per ton deliv- 
ered on the cars; is the loss to the assured si, 000? no. because, before he 
can deliver this hay and realize his Si, 000, he must pay the warehouse- 
man SI per ton for storage and delivery charges. This he has not paid, 
nor is he any longer liable for it, consequently, we deduct 8100 from his 
claim and reinstate him by payment of 8900. If we replaced his hay, or 
paid him the market value, we would be practically making him a present 
of 8100. 

If, then, it is admitted that the payment of the market value is virtu- 
ally the payment of a certain measure profit to the manufacturer, the 
question arises, what is the extent of the profit for which we are not lia- 
ble, and how is it to be measured? 

In order to dispose of his stock and realize a cash equivalent, the man- 
ufacturer must add considerably to the expense and labor already con- 
sumed in the production. He employs, perhaps, traveling salesmen, he 
advertises his goods, he maintains an office and clerks apart from his 
factory, he spends part of his own time in accomplishing the sale; he 
gives credit, and he makes bad debts; all these items of expense and loss 
are saved to him. and so become a profit; when, under the decision of a 
court of law he is paid by an insurance company in cash the market rahte 
of his goods. 

Again, the margin between cost of production and market value may be 
so small in some cases as to bring the sum realized (after the selling ex- 
penses are paid) below the actual cost of production. In such cases the 
manufacturer is doing an unprofitable business, and the payment to him 
in cash of even the bare cost would be excessive compensation, as he 
would not net that amount in the regular course of the business. 

The principle of deducting unearned profit is practiced on this coast to- 
day, but it is used in only one class of adjustments, so far as I am aware. 
I refer to losses on grain in the field. The method of arriving at the 
measure of damage in these losses is a most perfect illustration of my ideas 
on the manufacturer's loss. Suppose that grain is burned in stack. We 
do not figure cost of seed and labor to put it there; not because it would 
be a difficult matter, but because we fully recognize that the farmer has an 
accrued profit in that grain, for which he should and must be indemnified 

so with the manufacturer. Neither do we pay him market value of his 
grain, although the product is complete; what then do we pay? We ascer- 
tain the market value of the grain in the nearest warehouse, and figure 
back to the point at which it burned. First, we ascertain the cost of 
threshing, to this we add the expense of sacks, twine, and the subsequent 



152 FIFTEENTH ANNUAL MEETING OF THE 

hauling to warehouse, and all this is deducted from the market value to 
ascertain the sum of money necessary to reinstate the claimant — so should 
it be with the manufacturer. 

Looking at it as we may, it seems impossible to get away from the con- 
clusion that the market value of the goods less the cost of realizing this 
amount is the true measure of the manufacturer's loss. 

Assuming this position to be correct, the question would at once present 
itself, where shall we find the sum that should be deducted from market 
value to bring the figures in line with our liability ? An examination of 
the books, showing the experience of previous years will give it all, except 
the value of the manufacturer's time spent in the disposal of the stock. 
Gather from the different accounts of the previous year, or any stated 
period, the amount spent for other purposes than manufacturing, into this 
divide the sales for the term, and thus obtain a percentage of actual ex- 
penses sustained in selling; to this should be added interest for credit 
given, and an ascertained percentage for bad debts. We lack but one im- 
portant item to make the figures complete, and I see no way to arrive at 
this, except by agreement with the assured. A certain portion of his time 
is devoted to the realizing of his entire profit, after manufacture has ceased, 
and it is not right that he should be paid for this, any more than he should 
for the other unexpended costs. 

I will not attempt a solution of this part of the problem. Every case 
would require a different method of handling. It is enough to suggest 
the equity of the position, and allow the adjuster to maintain it in his own 
way. This will afford him an excellent opportunity for the display of his 
talents. 

If it is conceded that the deduction of these figures from the market 
value of the manufactured goods is properly made, to show the actual 
measure of damages for which we are liable, the next question which pre- 
sents itself is, how shall goods in process of manufacture be treated? To 
this I think there can be but one answer — cost of material and labor to 
the point at which the fire found them should be considered ample indem- 
nity, while upon material itself, not yet changed from its original condi- 
tion, the bare cost would be the loss. An exception should be made 
where the value of this material in the market is greater or less than the 
cost to the assured. In the former case, payment of this enhanced value 
would be indemnity, while in the latter, replacement might perhaps be 
necessary to protect the company. 

Good law is said to be nothing but good common sense, and this remark 
is equally applicable to the adjustment of a loss. It is not good sense to 
claim that a manufacturer has received the actual cash value of his go \& 
when he has been paid the bare cost of production, nor is it good sense to 
claim that the market value is his loss, under a policy of insurance which 
guarantees him nothing more than indemnity. In the one case he is not 
indemnified, and the couit-5 will so determine; in the other he is paid an 



FIRE UNDERWRITERS' ASSOCIATION. 153 

expectant profit, and this fact the courts should recognize. Why the 
courts do not recognize it, and fail to go as far out of their way to do jus- 
tice to the companies, as they sometimes do, in the interest of the assured 
may, perhaps, be our own faitlt. The adoption of a universal rule of fair 
treatment in the settlement of square losses will gain for the companies 
the respect and support of honest Judges, and insure in time rulings more 
in harmony with good sense, while evidence of sharp practice will come 
back on us disastrously in the shape of retaliation. 

It is useless fo disguise the fact that cases are sometimes brought before 
the courts which, in all fairness, should have been settled outside. Can 
we wonder, then, that human judges will lean in their decisions toward the 
apparent^ oppressed side? Would it not be better for the companies in 
the end, if adjusters would cheerfully accord to the assured the full extent 
of his legal rights, and thus compel a recognition of their own ? 

If this course were pursued, we would not find reported such decisions as 
the following: 

In an action against a fire insurance company to recover the amount of 
a loss, the assured is not limited to the amount claimed in the proofs of 
loss, if he was induced to execute the same through the false representa- 
tions of the company's adjuster. 
14 Ins. Law Jnl., 863. 

This business is what we make it. Unfair decisions are provoked 
by unfair treatment, and points are recorded against us which stand as 
precedent for all time, because some shrewd adjuster tried to make a sal- 
vage where none existed. Do not mistake me. A dishonest claimant 
should have no mercy shown him; a man who demands more than his due 
should have no consideration; but the honest loss should be treated in 
such a way that insurance companies and insurance men will receive from 
the public that respect which the financial strength of the one, and the 
business ability of the other deserve. 

W. H. LOWDEN. 

The President — As usual, Mr. Lowden has given us a 
first class, rattling good paper, and there may be some 
of you here who disagree with Mr. Lowden on proposi- 
tions that he advances, and I should be very glad to have 
those gentlemen, whoever they are, if there are any, get 
up and express their views on the subject. 

Mr. Carpenter — Mr. President, we might perhaps dis- 
agree with him, but I think it would be like the young 
man in the debating school, who very impressively 



154 FIFTEENTH ANNUAL MEETING OF THE 

stated, " I deny the fact /" As the courts have decided in 
this way, I don't see what good it is going to do us to dis- 
agree with him. 

Mr. Kinne — Mr. President, it seems to me further 
than that, that while the tendency has been in the past 
few years to appreciate the honesty and propriety of an 
accrued profit, in contradistinction to that of an antici- 
pated profit, the difference between the manufacturing 
establishment and the man who produces at a certain 
cost, and perhaps something higher to compensate him 
for his worry, that Mr. Lowden has given us two things 
to worry over. He has said that we must appreciate this 
fact, and yet, at the same time, the man who has a stock 
of manufactured goods which is at a commercial point 
where they could be sold, should yet have something de- 
ducted from that, and thereby leaves us in the mire. He 
has given no idea as to what that deduction, what the 
difference between the actual accrued profit of the manu- 
facturer is, in what it is to be defined, as I understand 
it; that there was a something left undefined by the 
courts and by honest practices; that there was a shading 
down from the market price of manufactured goods, 
whether they are lumber sawed from logs, or coats and 
vests made from raw material, or whether it is hay 
in a warehouse. That there is something below that 
point, and instanced in one case the fact of a warehouse 
charge. Now, it seems to me — without going into the 
saw mills, and planing mills, and furniture factories, 
and clothing establishments of any kind, no matter what 
they are, but we will take the farmer — the real founda- 
tion of the whole country rests upon the soil and the man 
who cultivates it is the man who ought to get the best, 
but don't. I contend that the farmer who has been able 
to place a thousand tons of wheat in a warehouse, is en- 



FIRE UNDERWRITERS' ASSOCIATION. 155 

titled to the market price of that wheat. It is a manu- 
factured article just as much as furniture is, or anything 
else as soon as it has arrived at a point when a commer- 
cial, or marketable value can be ascertained. 

If a man has got anything that can be attached 
by civil process, the storage that is due upon a promise 
to the warehouseman that if he would care for his goods 
to a certain time becomes a claim against him, and, 
in that case, it is a claim against the merchandise 
that was destroyed. I think if you follow out that 
idea, that Mr. Lowden must see that the claim 
against an insurance company, based upon the princi- 
ple of indemnity, with that clause in the contract, that 
it is what it will cost to replace; that there is no happy 
medium between that and the actual cost. If he re- 
linquishes the right of the manufacturer, or rather de- 
nies the right of the manufacturer to claim anything 
beyond actual cost of production, as ascertained by facts 
and figures, then he has got to come right to the point 
of what it w r ould cost us to replace it at the time of the 
fire; not what it would a year ago; not what it may cost 
by and by, but at the time of the fire what would it cost 
the man that w r as insured to replace those goods. If 
you start from the one point and come to anything like 
that, you have got to work it out squarely and fairly 
and honestly, and unless it can be shown by what pro- 
cess a certain percentage off from that should be de- 
ducted, how it can be figured, then I insist upon the 
proposition that replacement is the measure of damage, 
and that is what the insured is entitled to. 

Mr. Wetzlar — The paper read by Mr. Lowden here 
just now was so replete with important facts, and with 
suggestions diametrically opposite to methods of proced- 
ure now in use, that I feel like the philosopher did when 



156 FIFTEENTH ANNUAL MEETING OF THE 

the child propounded a proposition that it took months 
of research to gainsay. There are some novel ideas ad- 
vanced by Mr. Lowden in his paper. For instance, if 
my memory serves me right, in one instance he says 
that the manufacturer having his goods in warehouse is 
exactly in the same position that the retail dealer is. 
This in itself, looking at it casually, quickly, as when a 
paper is read subjects crowd themselves so quickly upon 
each other that we cannot give them the thought which 
they require, would seem to be almost incongruous. I 
would therefore suggest, as it seems that we are taking 
up lots of time here, which we should not at the pres- 
ent moment, that the papers as presented to this Asso- 
ciation at this meeting, be taken up regularly at some 
of the monthly meetings of the Association for the com- 
ing year for discussion. This will give each member 
the opportunity of thought and study how to gainsay 
the propositions which are advanced or to give his en- 
dorsement thereof. I have no doubt that the paper a- 
presented by Mr. Lowden is the result of much study 
and research. That much therein contained is the 
result of deductions made from logical conclusions, and 
therefore it places the members of this Association at 
great disadvantage to get up and extemporaneously 
criticise any papers. I would suggest again that the 
papers be taken up seriatim at the monthly meetings of 
the Association, and be discussed in detail, as I believe 
much good and much benefit will be derived by the As- 
sociation and by every member participating in the 
discussions. 

Mr. Callingham — Second the motion. 

Mr. Driffield — Mr. President, while I agree fully with 
Mr. Wetzlar's suggestion, that there is a great deal in the 



FIRE UNDERWRITERS' ASSOCIATION. 157 

papers that have been read before the Association, that 
would make very fine topics for discussion in our 
monthly meetings, I still think there has not been 
enough said at this meeting upon the paper of Mr. Low- 
den, and that the suggestion of Mr. Wetzlar need not be 
acted upon as a quietus on the proceedings at the pres- 
ent time, and that some few words further may be said 
upon the subject here, as well as debating upon the sub- 
ject at a later date. 

I listened very closely to Mr. Lowden's paper and think 
there can be very little divergence of opinion regarding 
the conclusions reached by him. I know that one of 
my first losses was a manufacturing loss. It was the case 
of L. Bates of Nevada City, w r ith whom I think many 
of the underwriters here are possibly acquainted, as he 
has had frequent losses. It was a case in which there 
was some lumber stored at a place, the whole of which 
was burned, presumably by an incendiary. I adjusted 
the loss upon the basis of the actual cash value of the 
lumber at the time of the fire and at the location of the 
fire, w T hich, I think, are the conditions of the standard 
form, and coming down on the train from Sacramento 
I met C. P. Ferry, with whom I had been associated in 
the New Zealand Insurance Co., and I remember having 
the pleasure of an interview r with Mr. Dornin, and I be- 
lieve Mr. Tom Grant, and a few others who had been in- 
terested in previous fires, and also hearing diverse views 
upon the subject which confused me very greatly, how r - 
ever. Despite the little experience I have had in the few 
years that I have been an adjuster, I have come to the 
conclusion that the measure of damage in the adjust- 
ment of manufacturing losses, is unquestionably what 
our policies provide. The contract is there to stand for 
itself. I do not think that the market value, as advo- 



158 FIFTEENTH ANNUAL MEETING OF THE 

cated by Mr. Lowden, or as stated by Mr. Lowden, need 
necessarily be the measure of damage. I think that the 
actual cost of the goods at the time and at the location 
of the fire, is the measure of damages. That cost I 
think, should be ascertained in accordance with the sug- 
gestions and conclusions reached by Mr. Lowden. Take 
the case of the lumber in San Francisco, which had been 
contracted for by the new Del Monte hotel. I deducted 
from that cost of cartage from where it was stored down 
to the railroad for shipment, and the freight and cart- 
age from the railroad to the place of delivery. But a 
suggestion has been thrown out by Mr. Lowden that I 
did not think of at the present time or until this very 
meeting, and that is, that that man certainly did get a 
profit, although there would have been an accrued profit 
in that seasoned lumber there, unquestionably. There 
was a profit; I paid that man a profit which the policies 
did not provide for, and that was in the cost of getting 
rid of that. I think that is the valuable suggestion in 
Mr. Lowden's paper. The deduction that we have to 
make in order to arrive at what is the measure of dam- 
age to the claimant. First of all we should arrive at the 
actual cash value at the time and in the location of the 
fire, then deduct the cost of getting rid of it, and that 
is the valuable suggestion in Mr. Lowden's paper. 

Mr. Lowden — I know that in reading a paper over hur- 
riedly the members could not catch the meaning very 
closely. I tried to read it as slowly as possible. I think 
Col. Kinne did not grasp what I said. He said that I 
did not make any provision for a proper deduction from 
the market value of goods destroyed. I claim there 
should be a certain deduction; in other words, insur- 
ance companies should not step in and pay the assured 
a price for his goods which he could realize in no other 



FIRE UNDERWRITERS' ASSOCIATION. 159 

way except as the result of a fire. There are certain 
expenses incurred in disposing of a stock of goods in the 
ordinary course of business, that expense I claim 
should be deducted from the face of the policy. 
Replacement of the goods is not obligatory upon insur- 
ance companies. It is only resorted to when we can 
make money by so doing. The reinstatement of the 
assured in the position that he was at the time of the 
fire may be either by paying him money, or in some 
other way. The insurance policy is a contract of in- 
demnity; we have got to reinstate the insured. Now, 
reinstatement does not compel replacement; it cannot. 
A man has a building to insure worth a thousand dollars 
we will say, and he puts one thousand dollars insurance on 
it, and the building is burned. You can replace that build- 
ing. He has got the building back again; but he has got a 
better building than he had before. The property has been 
replaced, but the assured has been more than rein- 
stated. He has a better building. So the manufacturer 
should not receive the market value of his goods. He 
has expenses of traveling salesmen, etc., and perhaps 
has to give a credit of 60 or 90 days on his product 
before he can realize his money, and these are properly 
deducted from the market value. 

The President — It seems to me that Mr. Lowden's 
paper gets right down to the proposition that the measure 
of damage is the market value, less what we might call 
the wholesalers' expense. That is, the wholesaler buys 
from the manufacturer and he has certain expenses of 
putting them on the market, advertising, traveling, etc., 
and the market value less the wholesalers' expense is 
what, according to Mr. Lowden's paper, constitutes the 
measure of damage under the policy. 

Gentlemen, are there any further remarks on the paper 



160 FIFTEENTH ANNUAL MEETING OF THE 

of Mr. Lowden? If not, we will come down to the fea- 
ture of the afternoon, the California Knapsack, by our 
friend, George Grant. (Applause.) 

Mr. George Grant — Mr. President and gentlemen: 
The members have not done their duty by the Knapsack 
this year, I regret very much to say. I have received 
only three or four contributions. I know, however, your 
spirits have been willing, and if you will promise not to 
laugh at the serious part of the paper, I will freely for- 
give you. I am not feeling as fresh as I would like. 
This is the fifteenth volume of the Knapsack. 

Vol. XV. CALIFORNIA KNAPSACK, 1891. No. 1. 

EDITOKIAL. 

Gentlemen of the Association: — I give you greeting for the year 1891. 
The Knapsack maybe a trifle empty. It maybe even comparatively thin, 
if so it is the easier to bear. 

Possess yourselves with patience, listen with becoming deference and 
hide your emotions. It will soon be over. We do not write for the 
Knapsack in hope of glory, for a truth, I don't know why we write for it, 
but assuming it to be for some good object, why not a sermon in place of 
an editorial? 

A few years ago in Los Angeles, while walking to the Santa Fe depot 
to take an early morning train, being in doubt, in spite of carefully worded 
directions I hailed a colored brother on the walk for further proof of my 
bearings. 

With a smile that lit up a broad expanse of glossy blackness he said, 
4 ' Keep a steppin' Colonel, keep a steppin' and you will get there." Iu 
spite of the original manner of the directions, and the unusual sound of 
the military title which was enough in itself to distract everyday thought, 
I detected at once in this speech, crystallized and glowing, a "gem." 
" Keep a steppin' and you will get there." 

Fix your eye upon the goal and never stop until you reach it. Do not 
grow weary, or if weary do not give up, where there is a will to achieve 
there is a way to accomplish. 

Fight it out on the line laid out if it takes the whole season. That 18 
the deduction I draw from the words of the smiling Ethiopian, who 
thought to be simply good natured, nothing more. 



FIRE UNDERWRITERS' ASSOCIATION. 161 

From time to time epigrams crisp and clean-cut fall from the lips of 
great men who are thereby made so much the greater, and these words 
live in the world's history reappearing at intervals in print and speech to 
point a moral. And so the modest words of my dusky friend fell upon 
my ear. Keep a steppin' and you will get there, a seed fallen by the way- 
side which, springing up wet with morning dew and warm with noon-day 
sun, putting forth leaves and blossoms until grown big enough to delight 
the eye and give forth perfume free to all who pass that way; so these 
words took firm enough possession of my mind and stayed green in my 
memory until now. Thus I give them to you for what they may be 
worth. "Keep a steppin' and you will get there." Are you young in the 
business, a special with your fortune all before you ? Then you have 
many and many a heart ache yet to bear. 

For that genial gentleman who is at the head of your office, although 
himself once special agent and comparatively only yesterday hurrying 
over the road at the direction of others to do the very same kind of busi- 
ness he now sends you about, that same genial gentleman will hold you 
to a strict accounting and rule you with a rod of iron long after the time 
when you have proved to him that things have changed and he is the one 
who is not up with the procession. 

" Keep a steppin' and you will get there." The day will come when you 
feel within yourself a strength born of hard and honest work. That day 
is your emancipation. Keep a steppin', but try to remember when you 
hold the lines and drive, there are other ways of getting the best out of a 
willing horse besides plying the lash. 

Are you an adjuster burning the lamp at night, with a wet towel around 
an aching head, digging out the Kinne and the Sexton rule, having a 
catch as catch can encounter with non-concurrent puzzles and co-insur- 
ance pigs in clover? 

" Keep a steppin' and you will get there." Ten to one you know more 
now than the celebrated authors you worship, for my dear plodding soft- 
hearted friend, it is not the man who knows everything that receives the 
plaudits of his fellows, but the man who has the faculty of putting what 
little he knows in a conspicuous place at the supreme moment when eyes 
are turned his way. 

" Keep a steppin' and you will get there." For there never was a square 
adjuster in this world who did not attract attention to his office, and 
some day in poring over the pages of this company's business the directors 
will put you in a conspicuous place as a marker. 

Are you a manager with honors thick upon you, while cares and vexa- 
tions sap your life and send you tired but sleepless to an exhausting bed? 
" Keep a steppin'," but take the Knapsack's advice, Don't try to do the 
work you graduated from, have the same faith in your clerks as your 
employer used to have in you. Take a vacation once in a while, pound 
your ear with the monotonous roar of the ocean surf, or the whistling 



162 FIFTEENTH ANNUAL MEETING OF THE 

breeze of the mountain top. Don't try to do everything in one day, stop 
a moment and think. Yon are now on the shady side of life. Your tastes 
are few, your habits are fixed, your form is set and you are hardened, 
you are a type, but you are not and have no right to be a flint. 

" Keep a steppin '," for there is something for you to think of beyond 
the success of this life. It will do you no harm and relieve those about 
you, when you have resigned yourself to the thought that you cannot 
live to carry out your cherished plans forever. There is somewhere else 
to go. "Keep a steppin' and you will get there.'" 

Geo. F. Grant, Editor. 



Sacramento, February, 1891. 

One day I received a telegram from San Francisco, requesting me to 
meet the assured that night, take Marysville train with him and proceed 
to Camp No. 10, and adjust a mill loss. The assured was a total stranger 
to me, and I did not discover his identity until just before we reached 
Oroville. It was then 2 o'clock in the morning; we decided on an early 
start and filled in the time until gray dawn lounging about the hotel office 
talking in subdued tones for fear of disturbing sleeping guests. The 
assured agreed to all my proposed plans and was in perfect accord with 
the smallest details. As we seated ourselves for an all day drive I thought 
" How seldom it happened that everything is so harmonious." And yet 
there was an unsatisfied feeling with me; after a short attempt to analyze 
it I gave it up and turned my attention to the assured as a study of human 
nature, a favorite pastime with me. 

He was long and thin, over six feet in height, with no unusual expres- 
sion of face. He had taken the lines when we started, and although not 
an expert driver gave evidence of familiarity in handling a team. He sat 
in a most uncomfortable position, for his legs were so long they had to be 
doubled up in the space between the seat and the dash board, and he 
maintained the same cramped position all day long, working the brake 
with his right hand. For a few minutes after we started he chatted pleas- 
antly enough but soon subsided and eventually answered my remarks in 
monosylables. 

He did not care for the rugged and beautiful scenery along the road; 
the warmth of noon, the running brook, the gorgeous sun set, had no 
charm for him. 

He had consideration for the team in climbing au ascent, but rattled 
down hill in a rapid, careless way. which caused me to regard him with 
unusual scrutiny two or three times when we struck steep pitches, al- 
though he was aware of my eyes being on him a great part of the 
time, he made no comment and appeared unconcerned. As we drew near 
the "Mountain House," where we were to jDass the night, he asked sud- 
denly, in an anxious way, if there was a moon to-night? and seemed 



FIRE UNDERWRITERS 7 ASSOCIATION. 163 

relieved when I answered, no. Why is it, I thought as I dropped out of 
the buggy at the tavern door, why is it that this very common place per- 
son disturbs my peace of mind. I shall be relieved when I go to bed and 
shut him out of my thoughts. 

The mountain house was neither a dwelling nor a hotel. It was a place 
where travelers to and from Camp No. 10 got a drop to drink and a bite to 
eat; the price paid should have been the equivalent of a downy bed and an 
appetizing meal, but the reality, alas, how different ! Here was a landlord 
to whom a pallet of straw was a dreamful couch, and a dried-apple pie a 
luxury, but he gave his guests welcome with an air of hospitality hearty 
and genuine. After the usual refreshment at the bar, we went into sup- 
per. Now for the first time I saw the assured without head gear; his hair 
stood out thick and stiff all over his head, an enviable head of hair to a 
man of forty-five, but it seemed to neither add nor distract from the ap- 
pearance of this man, and once more I took myself to task for the persist- 
ency with which I stuck to the idea that somehow he was an unusual 
person. Leaving the table first, by accident I took up his hat. It was so 
small it perched on my head like a child's hat. In a moment he came out 
and settled it easily over his shock of hair. 

Well, I thought he is peculiar for a small head, if nothing else. 

The mountain house had just one guest chamber, in which were two 
beds. I was tired enough and the thought of an early start for a round 
trip to Camp No. 10, caused me to turn in soon after supper. Directly in 
came the assured, walked over to the window and peered out, muttering 
to himself " no moon yet." Then he pulled a drawer from the bureau, 
placed it on top of that article of furniture, so that the candle light was 
shaded from my side of the room, got out a yellow-covered novel, lit two 
or three extra candle ends which he took from a small traveling bag, and 
for all I know, read until morning. Once or twice in the night when I 
awoke he was still reading. As we took turn about with the basin and 
towel next morning, he suddenly asked if I had money with me; "just 
enough for expenses," I replied. "All right, I have plenty," he said. 
" See, this is where I hide it." and he pulled a good sized sack out of his 
pillow slip. 

We spent that day at the scene of the fire, returning to the mountain 
house where the bureau drawer, the candles, and a novel came into use 
again. Once more we were at Oroville, and if my companion had closed 
his eyes in sleep, I did not know it. 

I spoke of the incidents of the trip to my family, and after a day or two 
forgot the subject, when one evening my wife gave an exclamation, looked 
up from the newspaper she was reading, and said, this must be the man 
who had a loss at Camp No. 10. Listen: 

"Sensational proceedings for a divorce." " A husband shoots at his 
wife because she is too lovely to live." 

" Evidence of insanity." 



164 FIFTEENTH ANNUAL MEETING OF THE 

11 He takes a prominent citizen to Camp No. 10 on the plea of selling a 
mine." 

" He lashes the team and throws away the lines." 

" Arrayed in his night clothes, he shoots at the moon through the win- 
dow of the mountain house." 

"Curious testimony introduced." 

" Full particulars in to-morrow's issue." 

In an interior New York town, the local agent of a fire insurance com- 
pany is stone blind, and has been so for years, while some of the officers 
to whom he reports, are not aware of his loss of sight. (Exchange). 

" Here's a state of things." It is an even bet that this man knows 
more about a hazard and sends in a better description of property than 
the average agent. 

He gets his information of a risk from his young son, and gives it more 
thought than if his eyes were open. 

At the same time, what kind of an outfit is a company having this 
agent for years and never sending a special to find out how blind he is? 

A VOICE FROM THE BANKS. 

Dear Mr. Editor: It has occurred to me that perhaps you may find 
room in the " waste basket" (which, in one sense, has been the invariable 
destination of my previous literary efforts), amid the wit and wisdom gar- 
nered there from the able minds and facile pens of general agents, special 
agents, and adjusters, for a few leaves from the varied experiences of an 
" outside city man." I read in the New Year's "Chronicle" a few ideas 
of a kindred spirit: " We New York City surveyors," said he, "are the 
ones who get the closest of all insurance men to the pulse of the people." 
And so I have found it, in the course of a brief experience at the work. 

In the first place, every " city man" must sport a trap of some kind, 
and frequently that outfit is the b'ete noir (figuratively speaking) of an un- 
usually checkered existence. No one can properly appreciate the double- 
dyed rascality of the remainder of mankind unless he has driven a light 
buggy about the streets of a crowded city. There are two points about 
which the beginner at this work must immediately make up his mind. 
The first is, that every other man driving a vehicle through the streets is a 
natural-born idiot, with designs on your life; the second, that the posses- 
sion of a good, healthy accident policy is simply prerequisite. The hack- 
men, street car drivers, and dummy " engineers" are the arch-fiends of the 
profession. If you see a hackman driving rapidly towards you up the wrong 
side of the car track, don't stop to expostulate with him or claim the rights 
of the road — get out of his way — drive on to the sidewalk if necessary— a 
hack will take off the wheel of an insurance buggy any day. If it be on 
Montgomery street, and you are quietly enjoying possession of your right 



FIRE UNDERWRITERS' ASSOCIATION. 165 

hand half of the car track, with an express wagon approaching, the driver 
looking backward — simply give up your rights without any fuss. He 
won't turn his head — it's a trick of his — and always insures an unob- 
structed passage. 

If in an otherwise deserted street you see a couple of children stand- 
ing, hand-in-hand, on the edge of the sidewalk, stop right there and 
wait till they get across. For as soon as you draw sufficiently near, they 
will start on a mad rush under the faithful steed's nose, still hand-in-hand, 
and looking neither to the right nor to the left. 

The city horse never makes any effort to " check up" for a pedestrian; 
he is so accustomed to human apparitions melting away from in front of 
him, that he comes to look on them as something unreal, which he couldn't 
touch if he tried. And children are possessed of a dare-deviltry in re-pass- 
ing teams, inversely proportional to their ages. I have frequently emerged 
from a house to find a horde of them collected around the horse, and all 
pulling hairs out of his tail. I remember driving down a mission lane one 
beautiful summer day, and noticing a little brat, less than five years old, 
with the most stolidly indifferent expression I ever saw in a human being, 
sitting bunched up in a heap on the curbstone, staring at the ground in 
front of him. As I jogged past, unexpectedly a hitherto invisible pea- 
shooter came slowly into horizontal position, and pht when I gained 

control of the usually docile animal, and turned to look back half a block, 
and swear at the imp, he had resumed his original attitude of contempla- 
tion, and the expression on his face was more stolid and more indifferent 
than ever. That boy will burn his house down some day, if he doesn't 
get hung before he owns one, which is more likely. 

But the trials of a city surveyor are by no means confined to incidents 
of transportation. It is far easier to escape collisions on the street, than 
it is to avoid conflict with the man who considers it a deadly insult to ex- 
amine the extent of his stock, or the character of his furniture. A woman 
is far easier to deal with. She seems to take intense satisfaction in escort- 
ing the surveyor through every corner of her house, pointing out the solid 
character of the furniture, the depth and capacity of the china closet; and 
even rumaging through trunks and wardrobes to exhibit the extent and 
matchless value of the " family wearing apparel." Your correspondent 
considers it the greatest imaginable good fortune that he happens to be a 
family man, for otherwise the details of feminine equipment which have 
been occasionally produced from these same trunks and wardrobes would 
have been embarassing in the extreme. I think it well that the insurance 
surveyor should be a married man — to put it professionally, the moral 
hazard is great. 

Sometimes the surveyor, with the laudable desire of increasing the busi- 
ness of his office, attempts a little soliciting on his own hook. 

"Beg pardon, madam, I had occasion to inspect this building, and 
11 



166 FIFTEENTH ANNUAL MEETING OF THE 

notice you are just moving into the lower flat. May I ask if you carry 
any fire insurance?" 

"Ah, jis, indeed, I do. I would'nt go tin minutes without that. Tim 
Flannigan insures me — and a raoighty nice man he is, too." 

" What office does he represent?" 

' That's that?" 

" Do you know the name of the insurance company? " 

" Indade I do not; it's Tim Flannigan insures me — my year isn't up till 
six weeks from next Chewsday." 

Wonderful business comprehension of the South of Market Street house- 
wife. She knows the agent, and the kind horse he drives, and knows the 
exact date on which to expect him, but the identity of the company is the 
one imimportant feature of the whole transaction. 

For a " City outside man" the events of a year form a curious study in 
numan nature. I have secured renewals from highbinders in the nastiest 
quarter of Chinatown (after half an afternoon spent in a distressing search 
ior the proper representative), and found them pretty good pay. I even 
once accepted a cigar, which after carrying it in m} T pocket somewhat 
distrustfully for two or three days, I finally gave away. I have con- 
versed with hard-featured women in les maisons cles joies, after openly 
hitching the buggy in front of the door, in broad daylight, with the per- 
fect consciousness of rectitude. I have discussed rates and valuations 
with the head of the boarding house herself — I blush to say it — still in 
her (let us hope) virtuous couch, and seeming unconscious of anything 
unconventional. I was upset completely once, defeated utterly, routed 
horse, foot, and dragons, by a mischeivous and decidedly good looking 
young girl, who, apparently exasperated by "peddlers " of all descriptions, 
started in promptly to guy insurance and insurance men, especially the 
present one, his voice, accent, appearance and suggestions, and wound 
up by saucily inquiring — arms akimbo — "Will you insure me, and for 
how much? " 

Well, the occupation is not uninteresting, and certainly keeps one con- 
stantly on the qui vive. The amount of work which an "outside man " 
finds he ought to do, in justice of the office, is simply endless; the close of 
the day finds, perhaps, one-tenth of it fairly accomplished. But there is 
one point upon which he and the manager can never agree, and that is, 
that the " Unpaid List " will, in spite of unremitting labor and anxiety, 
show occasional items of hoary-headed aniquity. Viator. 



Some time ago, the writer was sent to adjust a loss on a ranch dwelling, 
furniture and wearing apparel insured in the name of the rancher's wife 
As the lady was feeling unwell from the excitement consequent on th< 
burning of her property, I was unable to have an interview that day. M 
arranged that she should meet me at the nearest town next day. She was 






FIRE UNDERWRITERS' ASSOCIATION. 167 

on hand at the appointed time, and after some little pleasant conversa- 
tion, I led up to the matter of her loss; but on asking her to give me an 
itemized list of her effects, to my astonishment, she absolutely refused. 
On my asking her reasons for such action, she informed me that she was 
well acquainted with the methods of adjusters, and did not propose they 
should ever make any more money out of her. 

She stated: " Some years ago I owned a valuable reduction works in 
Arizona which was insured for $10,000 in the 'Tiger' Insurance Company 
of Milpitas. The property was worth fully $30,000. A fire occurred and 
the adjuster for the Tiger was sent down to settle the loss. An appraise- 
ment was had, I having to pay $50 a day each for two appraisers who 
traveled two days by stage to reach my premises. And after all, this ad- 
juster only allowed me $4,400 out of the $10,000, thereby making a clean 
profit for himself of $5,600. Therefore I am determined to accept nothing- 
less than the face of my policy." 

I argued with her and tried my best to convince her that our old friend, 
the adjuster in the case, was a man of high moral standing and would not 
be guilty of appropriating such a small sum as $5,600, but it was of no 
use, her con\iction remained unshaken. I had to leave her without taking 
any action at that time, but she subsequently made a full statement of 
her loss. 

I visited the general manager of the " Tiger " Insurance Company after 
the foregoing occurrence, and related the action of his adjuster as stated 
by the lady, when to my amazement, instead of defending his represent- 
ative, he coolly remarked, " Well, I never before understood how it was 
that Uncle William raised that mortgage off his house." 



1st Oregon Citizen — I thought you told me the adjuster who came down 
here was one of the right kind. 

2d Oregon Citizen — So I understood; what is there wrong with him? 

1st Oregon Citizen — He called me a thief and a liar and an incendiary, 
and every hard word he could lay his tongue to. 

2d Oregon Citizen — Why don't you have the law on him? 

1st Oregon Citizen — Because he can prove it. 



Oh, woman! woman! for what are you not responsible. Bless you! you 
not only make us, but you undo us. Your influence is in everything — 
social, political and ecclesiastical, and now you are in the merchandise 
account. 

True, that happened in the new State of Washington. We overlook a 
great deal that happens in Washington, but it is a give away just the 
same. 



168 FIFTEENTH ANNUAL MEETING OF THE 

In adjust merit of a hardware stock, in the ledger to the debit of mer- 
chandise, I found this charge: 
To girl hire in Seattle $6 00 

The merchant lived in Tacoma. 



Mr. C. W. Taylor, a clever newspaper man of Puget Sound, writes the 
following: 

"Fire." 

The wild cry rang out on the night air. Heads were thrust hastily out 
of upper windows, excited voices uttered quick inquiries, and in the dis- 
tance was heard the clatter of the engines coming nearer and nearer. 
From a large building around the corner huge volumes of dense smoke 
poured forth. The whole floor was on fire. The flames had not as yet 
communicated to any of the floors above. 

Nearer and nearer came the engines. They reached the scene. The 
firemen sprang to their task with alacrity. 

But an unforeseen contingency presented itself. There was no water. 
In vain the faithful men made the requisite connection of hose and water 
plug. In vain the engines throbbed with superhuman energy. Some- 
thing had happened at the water works. 

"Must I stand by and see my house burnt to the ground?" shouted 
the owner of the building, with tears in his voice. "Can nothing be 
done?" 

The chief of the fire department shook his head. He looked helplessly 
at the crowd that had gathered. 

Suddenly a great light shone in his eyes. With the quickness of a 
man trained to act in emergencies he darted into the crowd. 

There was a sound of rapid scuffling, angry protest and loud threats, 
and the chief emerged from the crowd with a large bundle in his arms. 

Calling imperiously to his men he ordered the front doors of the build- 
ing to be broken open. 

It seemed like the freak of a crazy man, but the order was obeyed. 
With a yell of triumph the chief sprang into the burning building, fol- 
lowed by his men. Grimy, choked and blinded by smoke, but victorious, 
they came out a few minutes afterwards, and the chief gave order to re- 
turn. He had smothered the flames with the trousers of an English 
tourist. 

It is painful for me to make diagrams for other people's jokes, but the 
fact is these were traveling trousers. 

That is why the flames were checked. 



WHAT IS THE MORAL HAZARD ? 

" This," writes a new agent, " is an unusual question to me; I do not 
understand it. If you mean Mrs. Jane Doe, the assured, she is 0. K." 



FIRE UNDERWRITERS' ASSOCIATION. 169 

Another, where a Methodist church building was the risk, answered 
the same question as follows: 

"My wife is a member of this church," but he did not say what the 
moral hazard might be. 



"No," said the parson, " we will not have our church building in- 
sured. Such an act would, in my humble mind, show a disposition to 
fly in the face of providence. We can trust God to look out for his own 
temple." 

11 Well," said the timid solicitor, " you may be willing to trust Him on 
the fire hazard, but I see you are afraid of Him on the lightning ques- 
tion," and he pointed to the nickel-plated rods on the church spire. 



A certain manager whom we will call Mr. X, not because he is, but be- 
cause we wish him to be unknown, dropped into his agent's office in a 
town in the Northwest. The agent said: "Mr. X, I wish you would look 
at that veneered brick building down there and tell me what line you 
want on it ? " So away posted X, and soon returned with the reply that 
he had tried the bricks with his knife and really could not see any differ- 
ence between veneered bricks and any other, so would carry as heavy a line 
on that building as on any in town. 



Editor Kxapsack: — I have never been quite able to conceive why the 
receptacle of all the light and easily digested pabulum set forth at our 
literary feasts should be designated "Knapsack," and why not " Grip- 
sack" instead. It is true that there is a close resemblance in our voca- 
tion to that of the soldier, with our tiresome, dusty marches, long cam- 
paigns, equipped and armed for all occasions, perhaps cold and dismal 
barracks and poor forage, many times glad to find crackers and cheese 
and some friendly grocery store in lieu of the wonted delicacies of beef- 
steak, hamneggs, livernbacon, ever ready to divide the last morsel of in- 
formation with a comrade, or to sleep under the same blankets — if we 
have to; but there the similarity ends, and it is the gripsack that is ever 
with us, a load by day and sometimes a pillow of fire-insurance traps by 
night. It is in the gripsack that we carry our other shirt and extra pair 
of socks, the rate book and last Coast Review, Lowden's Lectures and our 
best girl's photograph, Otey's Observations and the resolutions about the 
Credit Evil, and many other good things pertaining to the comfort and 
happiness of us; and where we should stow all these good things as we 
do others, to unpack for mutual edification, and I petition, sir, that here- 
after the title of "Gripsack," sir, be the title of this valuable collation. 
Vale! Knapsack! All Hail! Gripsack! 

Feby., 1891. 



170 FIFTEENTH ANNUAL MEETING OF THE 

You ask roe to give you the most extraordinary case of adjustment in 
my experience, I will do so, but it will prove disappointing, 

In all niy experience during a long period of years this case stands by 
itself, nothing like it has come under my observation . 

In the winter of '85 a loss occurred of which I received notice, and as 
quickly as circumstances would permit I went to the spot, arriving four or 
five days after the fire. No sooner had I registered at the hotel than a 
clean, fresh shaved gentlemanly looking man of middle age introduced 
himself as John Butler, of the firm of Butler Brothers, the assured. With 
great good nature and perfect composure he awaited my convenience, an- 
swering questions quickly and pertinent!} 7 meanwhile. He agreed to 
follow all my directions, and was so very willingly that I mistrusted him 
from the first. 

He conducted me to a building to which his stock had been removed 
and introduced his brother James, who, if possible, was more smooth and 
plausible than John. As I glanced along the shelves and over the counters 
my eyes took in hastily a well assorted stock of dry goods neatly ar- 
ranged, and to all appearances fresh and clean. " What is your claim," I 
asked: "A trifle over twelve hundred dollars,"' was the reply. I said 
nothing, but thought you will have a sweet time with this precious pair 
before you are done. Mechanically I went through the usual words de- 
manding an appraisement, at the same time mentally calculating the ex- 
pense of bringing my appraiser from home. " Will you look at this 
inventory, " said James. "We have just finished it; John and I hardly 
knew what to do, but concluded to go ahead as if we had no insurance. 
We have taken account of stock and placed our assessment of damage in 
this column here; the woolens, white goods, silks and what not are clashed 
by themselves; suppose you examine a piece here and there and see how 
it strikes you." Eyeing him sharply I complied; we went from place to 
according to my direction. Every measurement came out to a fraction. 
With most of the pieces I found about a yard cut off; this was the outside 
wrap which was damaged by heat and smoke. I was puzzled and my wits 
were hard at work I can tell you. " Suppose we visit the seat of the fire," 
I said. The fire started in a building next door to my claimants in the 
second story; on entering, the usual odor greeted my nose; here w; 
scene of ruin and coufusion, boxes and cartons blackened and broken, wet 
ceiling and sloppy fioor. "Did you get everything out," I asked: " V 
said James, "we did, and a hard time we had. We worked all night 
long the first night, and I thought John would be on the sick list sure. 

With a gleam of sense penetrating my foggy brain I asked for their 
books of account. "Check, .tally, check, tally," everything ship shape 
and in good order. "See here," I said desperately, "can you niak< 
affidavit that your loss is twelve hundred dollars?" "Well, no," 
James, " John has just reminded me that our cost mark is loaded ten per 
cent. We will have to make allowance for that." I looked at hi in help- 



FIRE UNDERWRITERS' ASSOCIATION. 171 

lessly — all at once I took in the situation, All at once I saw the whole 
thing as clear as day. 

The men were honest; now I was on the right track, and I followed it 
up carefully and proved that I was right. We had no appraisers from 
home that trip, we had no appraisers at all. It is the only case of the 
kind I ever met. 



AS OTHERS SEE US. 

There were a number of adjusters located at the "Golden Eagle" at 
Sacramento one time. It was not so much of a loss, nor were there 
suspicious circumstances; two men could have completed the adjustment 
in one day, but the officers in San Francisco could not seem to agree, and 
each company had a representative of some sort on the ground ranging 
from office boy to manager; what between " committee work" and individ- 
ual opinion the assured was in a highly nervous state. 

While the committee meeting was in session I walked out to that part of 
the town near which the loss occurred taking the assured with me. He 
was a Southerner and had pat his darkey boy Sam in charge of the place 
as a watchman. Sam had followed the Colonel and shared his fortune 
since away back in slavery days. He was a typical plantation hand and 
always spoke of himself as a "nigger." After inspecting the ruins and 
just as we turned to leave, the Colonel said, "By the way, Sam, have you 
seen any of those underwriters about here?" "No, sar; no, sar, " said 
Sam, " haben't seen 'em sar, spec its too late in the spring for 'em, sar." 
We smiled, and the Colonel said, " Why, you rascal, you don't know an 
underwriter when you see nim?" 

"Oh yes, sar, I know 'em." "Well, what is an underwriter," said the 
Colonel with mock severity. 

Sam looked scared; he began to lose confidence in his own knowledge, 
big beads of perspiration stood on his brow, he rolled his eyes rapidly and 
breathed hard. "I can't jest call he name," said he, " but he's an animal, 
sah; he's an animal, an he lib in the watah, and he dig, an he dig, an he 
dig, an he burrow, an he burrow, an he burrow, an bimeby the watah git 
in whar he been, and the levee break; oh, yes, sah, I see plenty in Louis- 
iana; he bad thing to hab round, sar." 

"I begin to think so," said the Colonel musingly, as we strolled back 
to meet the band of the faithful quartered at the " Golden Eagle." 



Having on a recent trip occasion to use a team, and thinking to secure a 
premium, I asked the stable man if he was insured. His urbane and defer- 
ential manner changed at once. " No," he savagely said, " I am not in- 
sured, and what's more, I never will take out a policy on my barn again." 
He was a subject for me and the following story is the result: 



172 FIFTEENTH ANNUAL MEETING OF THE 

" Did you see that blackened ruin as you came into town ?" said the 
stable mau. "That used to be my barn. When the hotel caught fire it 
set my barn off. It was a good, substantial building, put up in the solid, 
old fashioned way, and I kept it painted and repaired so that it looked 
every bit as well as this stable we are in now. Well, I had a policy of five 
thousand dollars on the ^building and I felt pretty good, for we had a. 
chance at the fire to run out all the stock and most of the wagons. 

"In a day or two, along came an adjuster, a nice, pleasant fellow, very 
kind and sympathetic, and as full of talk as a political speaker. ' Now, he 
said, ' what you want to do is to pick out the best carpenter in town. I 
will get another, and whatever these two men agree is the cash value of 
the building, you and I will stand by.' 

" Nothing could be fairer than that, so I picked out old Joe Brown and 
the adjuster brought in a mild spoken stranger, and we signed papers and 
swore before a notary, until all hands were tied i>p as tight as a bottle 
with the cork in. 

" The adjuster and I agreed to keep away from the appraisers and let 
them work out the figures. It took a good deal longer than I expected; so 
when the adjuster said it was ten o'clock and about his bed time, I decided 
to turn in, too, and get the figures in the morning. I had a room at the 
hotel, and it so happened the mild-spoken stranger had the room adjoin- 
ing, and he and Joe Brown were working there. After I had gone to bed 
I heard them talking. There was an old stovepipe hole in the partition 
and every word was plain and clear. They were as friendly as kittens, and 
Joe seemed to have things all his own way. So finally they footed it all up, 
and it came to a little over six thousand dollars — no dispute, all fair and 
square, and Joe was about to fill up the papers, when the mild-spoken 
stranger said, 'Now, we have to deduct the depreciation.' ' O, yes,' said 
Joe. ' I quite forgot the depreciation.' 'Ah,' said the stranger, 'it is easy 
to see you have had great experience in appraising losses. I noticed all 
along your adaptability.' ' Well,' said Joe in a pleased voice, ' I have had 
more or less to do with making up figures on losses, but mostly with men 
who would steal the coppers off a dead man's eyes. Now, you are as fair 
a figurer as I ever saw in my life.' The stranger gave a little cough 
and he said, ' Well, that is my reputation, and I try to live up to it — by 
the way, have you your Tiffany with you?' ' How is that?' said Joe. You 
see,' said the stranger, talking right along and paying no attention to 
what Joe said, ' in this matter of depreciation, Tiffany of New York is rec- 
ognized as authority by all of us expert builders and contractors.' 'Oh, 
yes,' said Joe, ' yes indeed, he is so.' ' Tiffanjv' continued the strait- 
'has devoted the best part of a well spent life to the study of depreciation. 
As you know, he has it down to the fraction of a hair, and when Tiffany 
says a thing, it is recognized as a fixed rule.' 

' So much so,' said Joe, breaking in, ' that I would just bet my life on 
Tiffany being right every time.' 



FIRE UNDERWRITERS ASSOCIATION. ltd 

•Let nie see,' said the stranger. ' I have mislaid my copy, do yon hap- 
pen to have Tiffany's book with yon?' 

•Well, no. not here." said Joe. 'I always keep a copy at the shop and 
one over at the house.' 

Here the stranger had a coughing spell that nearly took his head off. 
When he got his breath, he went over to the adjuster's room after the 
book. If it had not been for my agreement to keep away, I would have 
told Joe right there to hnrry up and give me a chance to go to sleep. 

The stranger soon came back with the book, then he rustled around 
among the papers, and finally he said, ' Where is that paper that tells how 
old the building is? ' 

' Here it is,' said Joe Brown: ' That building was put up in the fall of 
1870; that makes it — let me see, seventy — eighty — ninety — that makes it 
just twenty years old.' -Why, so it does." said the stranger, as innocent 
as a child. 'Just look here. Brown, and see if the depreciation is 
much on a barn as on a dwelling." 

Joe took the book and shuttled over the leaves for some time, while the 
stranger was writing, then he said something about his eyes troubling 
him at night, and gave the book back. 

'Ah,' said the stranger, 'that is the only thing I have against Tiffany. 
He will print his book with such fine type. He ought to give a magnify- 
ing glass with each copy. By the way, is your copy like mine? ' 

'Just exactly the same,' said Joe Brown, hastily. 

'Let me see, 'said the stranger. 'Depreciation — depreciation — ah. here 
it is on page 389. I will read it: " Frame, livery, hotel, sale and boarding 
stables depreciate annually 4 per cent." ' 

'Does it say four per cent. ?' said Brown. 

'Yes. Here, see for yourself: and on page 3S4 it says: " It should be 
remembered that all percentages on buildings are based on the actual life 
of the building, while any repairs, such as painting, renewing the roof, 
siding or flooring, should be credited to the building, and the per cent, 
of depreciation reduced to correspond, for the reason that the building to 
the extent of the repairs has been renewed." That is clear enough, 
don't you think? ' 

'Well, yes.' said old Brown, sort of hesitatingly, 'that seems clear.' 

'Well, now,' continued the other, 'in this case the question is has he 
kept up the repairs ? ' 

"Yes." said Joe, ' he has. The barn was in first-class condition." 

'That being the case," went on the stranger, ' we are safe in allowing 

one per cent, a year, which leaves three per cent, depreciation per annum, 

or for twenty years sixty per cent. lam disposed to be liberal in this, 

I have heretofore been, all the way through. Say we call it fifty per 

cent, and give the poor man the benefit of the doubt." 

'That seems very fair indeed." said old Joe Brown. 

While they were talking, it seemed to me everything was going my way. 



174 FIFTEENTH ANNUAL MEETING OF THE 

but when they stopped talking and went to writing, I commenced figuring 
up in my mind. I am not very quick at figures, so about the time they 
went out together, I had found that my five thousand dollar policy was 
worth about three thousand dollars. I jumped up and dressed mighty 
quick and went hunting for Joe. Pretty soon I met the mild spoken 
stranger. 

'Hello, 'said he, 'how are you? Your appraiser has just gone home. 
We have fixed up our papers and have been down to the Notary Public's 
office. They are all sworn to and I shall be off by the next train. Why, 
what's the matter of you? he said. ' Don't you feel well? ' 

' No,' said I, ' I am sick.' 

The next day we went over the. whole ground and I signed their papers. 
I tell you I was afraid if I waited a day or two they would bring me out in 
debt. After it was over I tackled old Brown. When he got as far along 
as quoting Tiffany, I just snorted. 'Darn your fool skin, Joe Brown,' 
said I, ' you never knew there was such a man as Tiffany in the world till 
that doggoned stranger came here. Don't you know, you old mud-turtle, 
that Tiffany is a big jeweler and never saw a jack plane in his life ? And 
all old Joe Brown said was, 'I want to know.' " 



The following is taken from the page of a ledger, recently used in the 
adjustment of a drug store loss at a remote village. 

The spelling is laughable, but the real humor of the thing is grim 
enough. He who runs can read the lesson therein contained. Don't 
monkey with drugs. 

April 28. Hals Basom $1 00 

" 30. Wizerd Oil 1 00 

May 1. Hales Hot Tar 50 

2. Spung , 15 

Asid Phosfat 50 

syrip Figes 1 00 

3. Citrat Magnica 25 

Coton and Linament 25 

Gargel 25 

4. Asavitedy 50 

Scitlitz Powers 25 

Tetegrof for doctor 25 

May 5. Perscripshun 1 00 

Syring 1 25 

Perscripshun 50 

Bed pan 75 

6. Perscripshun 1 50 

7. do " 1 00 

11 90 

May 8. Ded. 



FIRE UNDERWRITERS 7 ASSOCIATION. 175 

Q. What is a General Agent? 

A. A General Agent is one who combines theory and practice; the 
theory is for the home office, the practice for the country agents. 

Q. What is a "Local Secretary?" 

A. A conundrum which although no one can guess is not given up. 

Q. What is a Special Agent? 

A. One who makes or mars the business of a department, but who shares 
only in the reverses of the department. 

Q. What is a Local Agent? 

A. He who sells premiums to the General Agent. 

Q. What is a Broker? 

A. A Broker is the person who eats his pie and si III has it . 

Q. What is a Knapsack ? 

A. An annual publication in which appears the dullest thoughts of the 
"brightest minds in the profession/' 

Q. What is Salvage? 

A. A term used in marine insurance, sometimes improperly used in 
fire insurance, in which event it is that part for which a company has 
paid a total loss but which is subsequently dug out of the ruins and sold 
by the assured, for the benefit of the assured, without publicity. 

Q. What is the future of Fire Insurance? 

A. Ask me something else partner. I have been in the business twenty- 
five years, and I don't know. 



SOMETHING ABOUT ANNUAL BANQUETS. 

The man who " stays away" from the annual dinner does himself injus- 
tice; he uot only loses the warmth and glow which comes of good fel- 
lowship, but even what little there is of th espirit of social life which shows 
down town during business hours, is denied him. It is impossible to hold 
resentment for the man with whom you consent to dine; good appetite 
and fair digestion when brought to face an acceptable menu impel cheery 
interest in one's surroundings, and he is a churl indeed who cannot ex- 
change pleasant speech with his neighbors at such a time. To " stay 
away" is to lose an opportunity to study the social characteristics of a man 
you have known intimately for years in a business sense. He is modest 
who stays away because he is not used to grand dinners. He is sensitive 
who lets the lack of a swallowtail deprive him of pleasure, and he who de- 
clines for fear he may be called on for after dinner remarks represents a 
larger Dumber than one would think. 

Self-consciousness is not incompatible with the insurance business, but 
it is a painful complaint whether it takes the form of a lion or a lamb — 
there are a few good fellows who do not go where wine is drunk, but to 
them let me say: " Dear friends, I respect your prejudice, come and re- 



176 FIFTEENTH ANNUAL MEETING OF THE 

spect mine; there is good Koniari ice to cool you," while to all, my advice 
is to try the next banquet and my word for it, you will be benefited. 

There is one fellow who always gets there, and to judge by his subse- 
quent account, he gets there not only with both feet, but on all fours, I 
mean the gentleman who furnishes the newspapers with a report. Up to 
the time when the "last boat for Oakland" members, walk out in a body, 
this reporter seems pretty wide awake and clear, but thereafter the pleas- 
ures of an hour are crammed into a report of three or four lines. 

Songs, speeches, recitations, the President's closing remarks, pathetic 
Auld Lang Syne, all are squeezed out — and he proceeds (each for his own 
paper), something like this: " After the principal guests had retired a few 
choice spirits remained until a late hour, " or, "From this time on fun 
reigned supreme and the fleeting hours were crowded with song," etc., 
or this, " Merriment now waxed fast and furious, and at midnight," etc., 
etc., etc., which gives the impression to the reader that only the four bot- 
tle men were in session. 

I have never seen this man with the pencil to know him — but after 
serious thought I am led to believe that he went out with the Oakland 
contingent, or else, unable to bear the unusual effect of white wine and 
red, he stole away and slept himself cold during the last hour of the feast. 

" Gentle reader," do not hesitate to trust your boy at the annual ban- 
quet; if he can learn anything but good from a room full of well dressed 
gentlemen, he is a vagabond at heart. So, for once in each year, let every 
member come to the spread; we will be entertained with a few set speeches. 
But our senses will tinge in response to flashes of wit and repartee — music 
will stir our hearts and set our tongues to speech, and believe me, for days 
and months the good effect of that social business banquet will be felt in 
each one of us, and in the profession we are proud to call our own. 

Like the spirit of Christmas, which opens the door to each heart and lets 
in the best and choicest memories, so our annual meeting will lay up re- 
collections of kind regard, each for the other, upon which we can draw 
during the year on occasions of doubt or perplexity. 



TO TAKE EFFECT AT ONCE. 

There is a stringent regulation of the P. I. U., 

And I'd like to see it take effect at once. 
That rebates shall not be made, to the many or the few — 

And I'd like to see it take effect at once; 
It's as grand a prohibition as anj^one could frame, 

And those who fail to heed it are very much to blame, 
Who breaks this righteous rule should feel the blush of shame- 

And I'd like to see it take effect at once. 



FIRE UNDERWRITERS' ASSOCIATION. 177 

There's another resolution that really should be passed — 

And I'd like to see it take effect at once; 
It's fully as important as the one I spoke of last — 

And I'd like to see it take effect at once. 
Let all policies be canceled if not paid in sixty days, 

And withdraw those useful papers from their anxious owners' gaze — 
This vote should be unanimous without the usual nays — 

And I'd like to see it take effect at once. 

And now to be consistent let me name another plan — 

And I'd like to see it take effect at once; 
It's as fair for each one of you as for any other man — 
* And I'd like to see it take effect at once. 
When your losses are adjusted and ready to be paid, 

Either cash should be forthcoming or a certain limit made; 
Uniformity of action on a basis that's well weighed — 

And I'd like to see it take effect at once. 

There's a sensible decision that the Managers could make — 

And I'd like to see it take effect at once; 
This concerns the special agent — it is only for his sake — 

And I'd like to see it take effect at once. 
Give that useful creature rest when he comes into the city; 

Don't worry him with work, but have a little pity; 
Don't make his trips so long but heed this warning ditty — 

And I'd like to see it take effect at once. 

In closing let me now propose a comprehensive toast — 

And I'd like to see it take effect at once; 
It's aim is somewhat scattering for it covers the whole Coast — 

And I'd like to see it take effect at once: 
Here's to one who in this business swings the balance of all power; 

Who wrestles with his customers and with ratings hour by hour; 
The Local ! may sound judgment be his everlasting dower — 

And I'd like to see it take effect at once. 

Edward Niles. 

The President — As usual, the Knapsack is replete 
with all kinds of good things, and I think that you will 
join me in saying it is a wonderful success. 

Now gentlemen, the hour is getting late, and we have 
before us the election of officers. That is the next on 
the programme. 

Gentlemen, please come to order. The first nomina- 



178 FIFTEENTH ANNUAL MEETING OF THE 

tion in order will be that of President for the ensuing 
year, and the chair is now ready to hear nominations. 

Mr. Kinne — Mr. President: It has always been under- 
stood that there is a certain unwritten law that is not 
printed in our regulations, but it is so well understood 
by us all that the one that has been the successful candi- 
date for Vice-President at any time, should be, twelve 
months later, placed in nomination for President, and 
that the Secretary will be instructed to cast the vote, 
without a dissenting voice; and I am sure that I echo 
the desire and the obligation in the minds of every one 
present, the members of this Association, that our pres- 
ent Vice-President, brother Lowden, shall be placed in 
nomination for President, and I therefore do so. (Ap- 
plause.) 

The President — Gentlemen, are there any other nomi- 
nations? 

Mr. George Grant — I move the Secretary cast the bal- 
lot of the Association for Mr. Lowden. 

The President — It is moved and seconded that the 
Secretary cast the ballot of the Association for Mr. W. 
H. Lowden, for President of this Association for the en- 
suing year. All in favor will signify by saying aye. 
Contrary, no. 

The ayes have it, and I take much pleasure in declar- 
ing Mr. W. H. Lowden as the coming President of the 
Association . (Applause . ) 

Mr. Lowden — Mr. President and gentlemen, I won't 
take up your time by making a speech here, for the reason 
that I am not very good at it, but I must thank you 
very heartily for the honor you have conferred upon me 
in electing me President of this Association. I feel 



FIRE UNDERWRITERS* ASSOCIATION. 179 

it very deeply; I have just been considering whether or 
not it is a fortunate or unfortunate circumstance, that 
makes me President when the Association is on the top 
wave of prosperity. Every meeting has been better than 
the preceding one, and it should be the duty of the 
President for the coming year to try and improve upon 
what has already been done. I would despair of doing 
this if I did not have faith in the fact that my friends 
would stand in on the proposition and help me out; 
and, later on, I w r ill take pleasure in calling upon you 
for the assistance that you can give, and I hope all w r ill 
give it freely, not for any personal motives, but for 
the good of the Association. (Applause.) 

The President — Gentlemen, the next nomination in 
order will be for Vice President for the coming year. 
We are now ready for nominations. 

Mr. Wetzlar — Mr. President, I rise to experience the 
pleasure of placing in nomination my friend, the genial 
special, underwriter and gentleman, Mr. H. M. Grant. 
I do so upon mature thought and reflection, having been 
mentioned as a candidate for the position myself. I do 
so as I believe the best interests of the Association will 
be subserved by his election, as there seems to be an 
unwritten law of the Association that no one but a gen- 
tleman connected with an insurance company should 
eventually fill the position, or the chair of President. I 
believe that the precedent that would be established by 
the election of a man occupying an independent position 
might be one that would be bad to establish, and I 
thank all the kind friends w r ho were willing to have sup- 
ported my nomination had I been a candidate, and as- 
suring them personally that I heartily endorse Mr. 
Grant, I desire to ask at their hands, the same kind 



180 FIFTEENTH ANNUAL MEETING OF THE 

endorsement of him as they would have extended to me; 
thanking them all for the kind expressions heretofore 
made to me. (Applause.) 

Mr. Driffield — I beg to second Mr. Grant's nomination, 
and would ask Mr. Wetzlar to so word his motion as to 
direct the Secretary to cast the ballot of the Association 
for him. 

The President — That is out of order. Are there any 
other nominations? 

Mr. Edwards — Mr. President, I want to second the 
nomination of Mr. Grant, and I want to state what I 
know in relation to the gentleman. I have been ass - 
ciated with him in the office for the past five years. 
Long ago I knew what the Association learned last year, 
and this year, of Mr. Grant's ability in the insurance 
line, and I feel assured that should he be permitted to 
be President of the Association at the next term, that 
we will never have a better President than we would 
have in Mr. Grant. 

Mr. Kinne — Mr. President, I desire to say that lam 
impressed with the idea that the members of this Ass 
ciation did not need the friction by which an unpolished 
gem could have been brought into the position where 
scintillating rays would be shown to us all, that brother 
Edwards has stated that he flatters himself was brought 
about by his own position, but that all the members of 
this Association from the time that Mr. H. M. Grant 
was brought into any kind of association with them, 
whether as a special agent, whether as an adjusl 
whether as one who was educating the local, or doing 
something when he was placed temporarily in the man- 
ager's chair, no matter upon what floor he was found, in 



FIRE UNDERWRITERS' ASSOCIATION. 181 

tvhat sphere of action his energies were placed before 
us, we found that he was competent as far as he knew, 
md, unlike many, was willing to learn more. There is 
no question but w T hat, in having Mr. Grant as our Vice 
President, and with the understanding that it is simply 
the privilege of being our President twelve months 
hence, that we will have made no foolish action. 

The President — Well, gentlemen, are there any fur- 
ther nominations? If not, a motion for the Secretary 
to cast the ballot will be in order. 

Mr. Dutton — I will make such motion. 

Mr. Sexton — I second the motion. 

The President — It is moved and seconded that the 
Secretary be instructed to cast the ballot for Mr. H. M. 
Grant as Vice President of this Association. All in 
favor of this motion will signify it by saying aye. Con- 
trary, no. 

The ayes have it. 

Gentlemen, the next office to be filled is that of Secre- 
tary for the coming year. I will say that the office of 
Secretary is an important one, and almost all the work 
of the Association falls on the Secretary, and there is a 
great deal of it. We are now ready for nominations. 

Mr. H. M. Grant — Before this nomination is made, I 
beg to express my sense of appreciation of the honor 
and distinction which the members have conferred upon 
me in selecting me for the office of Vice President, and 
for the kind pleasant words you have used. I esteem it 
an honor to be called to the position by this body of 
men, composed of the bright lights of the profession, of 
a learned profession such as ours, and while it was un- 
12 



182 FIFTEENTH ANNUAL MEETING OF THE 

solicited by me, I feel it, and appreciate it, and thank 
you. 

Mr. Sexton — Mr. Chairman, although having deserted 
an office with which you are connected, I have some 
appreciation in favor of it yet. I wish to put in nomi- 
nation Mr. George H. Tyson for Secretary. I understand 
he does his work pretty well over there. 

Mr. Carpenter — I second the motion. 

The President — Are there any further nominations? 
Mr. George H. Tyson, of the Fireman's Fund, has been 
put in nomination as Secretary of this Association for 
the ensuing year. Are there any further nominations? 

Mr. Lowden — I move that the nomination be closed, 
and that the Secretary cast the ballot. 

Mr. Edwards — I second the motion. 

The President — It is moved and seconded that the 
Secretary cast the ballot for Mr. Geo. H. Tyson as Sec- 
retary of this Association for the ensuing year. All in 
favor of that motion will signify by saying aye. Con- 
trary, no. 

The Secretary will cast the ballot. 

I declare Mr. Tyson elected Secretary of the Asso- 
ciation for the ensuing year. 

The next in order will be three members of the Ex- 
ecutive Committee. They are also elected, and we would 
like to hear some nominations. 

Mr. Edwards — Mr. President, our Executive Commit- 
tee for last year was a very efficient one, and as it is a 
little bit of work and very little honor, I imagine that 
the desire to be placed in the position does not enter the 
hearts of all. Our last Executive Committee was Mr. 



FIRE UNDERWRITERS' ASSOCIATION. 183 

Belden, Mr. Easton and Mr. H. M. Grant. As we have 
elected Mr. H. M. Grant as Vice-President of the Asso- 
ciation, we cannot very w T ell renominate him. I would 
renominate the other two members of the committee, 
Mr. Belden and Mr. Easton, and would substitute Mr. 
Stillman for Mr. Grant. 

Mr. Carpenter — I second the nomination. 

The President — Gentlemen, Messrs. Belden, Easton 
and Stillman have been nominated, and the nomina- 
tions seconded, for Executive Committee for the ensuing 
year. Are there other nominations? 

Mr. Sexton — I move that the nomination be closed, 
and that the Secretary cast the ballot of the Association 
for these gentlemen. 

Mr. Kinne — I second the motion. 

The President — It is moved and seconded that the 
Secretary be instructed to cast the ballot of the Associa- 
tion for Messrs. Belden, Easton and Stillman. You 
have heard the motion. All in favor will signify by 
saying, aye; contrary, no. The ayes have it; they are 
so declared elected. 

On motion, the retiring President was authorized to 
edit the proceedings of the meeting, and to revise and 
strike out immaterial matter therefrom; proofs to be 
submitted to the various members prior to printing. 

The President — Now, gentlemen, I know of nothing 
else to present to you this year. I again want to thank 
you all for the support and encouragement that you 
have given me during the past year. Our monthly 
meetings were all well attended, and the members 
entered with spirit into all debates and questions 



184 FIFTEENTH ANNUAL MEETING OF THE 

that were presented. It made my duties as President 
very pleasant and very satisfactory. 

Mr. Kinne — Mr. President, before this meeting comes 
to a close, we have to do one or two things. It is always 
usual to have a vote of thanks at this meeting; that the 
Secretary shall be paid a certain amount, or allowed a 
certain amount — a warrant drawn for a certain sum, 
and I move that the retiring Secretary be allowed the 
sum of $100 for his services during the past year. 

Motion seconded and carried. 

Mr. Wetzlar — In accordance with the views expressed 
by you yesterday, the Committee on Badges has a report 
to make, if you desire to have that at this meeting. If 
you will allow me, I will make a short report here. 

[Reading.] 

EEPOKT OF COMMITTEE ON BADGES. 

To the President and Members of the Fire Underwriters of the Pacific — 

Your. Committee to whom was referred the matter of badges for the As- 
sociation, having interviewed the Fire Commissioners as regarded the rein- 
statement of the badge formerly adopted by the Association, respectfully 
report as follows: 

That whereas, the Fire Commissioners express their willingness to grant 
this Association the use of any badge they might see fit to adopt, they at 
the same time decided that whatever badge is adopted by the Association 
could only be issued through the Fire Commissioners, and if the badge 
we had formerly in use was to be again used as a fire badge, then it would 
become necessary for this Association to return to the Fire Commissioners 
all badges heretofore issued, and have them reissued to the individual 
members of the Association who would have to guaranty by an undertak- 
ing in writing that the badge would not leave their possession or be used 
by any other party, except the one to whom the badge was issued. As it 
would be impossible to produce to the Fire Commissioners all the ba< 
of the design heretofore used by this Association, many of the badges hav- 
ing been lost or destroyed, or being in possession of parties to this A 
ciation unknown, the first proposition of returning these badges for reis-ne 
could not be met. It therefore became necessary for this Committee to d< - 
vise some plan whereby the Association might have a separate fire badge, 



FIRE UNDERWRITERS' ASSOCIATION. 185 

from that of the "door plate design" now issued by the Commissioners. 
As the question of redemption of the badges formerly in use would cut 
considerable financial figure with this Association, your Committee would 
therefore recommend that it is the intent of this Association that the badge 
formerly used by the members, be redeemable by such members as desire 
to redeem the badge at the price paid therefor to the Association, namely 
|2.50; but that the Committee hopes that as many as possible the mem- 
bers will retain their old badges as mementoes of by-gone days, thereby 
relieving the Association of the financial obligation, and that such mem- 
bers present at this meeting as are willing to forego their claim against the 
Association signify so by a viva voce vote, or in any other manner that the 
Association may direct, and we furthermore present to the Association a 
design for a new badge to be adopted or modified, as the Association may 
wish, which shall be known as the "Association's Badge" and shall be 
taken by this Committee for approval to the Fire Commissioners; and by 
them issued to any party or parties designated by this Association as future 
custodians and guarantors for the issuance of such badge to individual 
members of this Association. This badge as recommended to you by this 
Committee is in the shape of a Maltese Cross, the corners of which are 
trimmed out and upon which is engraved and filled in with hard enamel, 
the words " Fire Underwriters " and number of badge. The question of 
size of this badge is one that must be determined by the Association. Its 
cost under the present size as depicted in the diagram, will be to the Asso- 
ciation $2.00 each. The Committee would recommend that the purchase 
of such badge be left optional with each member. 
Respectfully submitted, 

A. J. WETZLAR, 
D. HIRSCHFELD, 
Of the Committe. 

Mr. Lowden — The report being in the shape it is, I 
move the adoption of the report. 

Mr. Edwards — Now let me ask; the carrying out of 
that report, will that remain in the hands of the badge 
committee. We have a committee on badges now. 
Designate which committee is to be the custodian of 
that badge. 

Mr. Kinne — It seems to me some one must be desig- 
nated. The designation can be made by the Associa- 
tion, and the proper custodian of the badges would be 
the Secretary and Treasurer, who is the only one that is 



186 FIFTEENTH ANNUAL MEETING OF THE 

paid for his services, and we can demand certain duties 
from him, and Mr. Tyson, the Secretary for the com- 
ing year, can have these badges placed in his keeping 
by the Fire Commissioners. We propose to pay him 
something, and we demand that they be carefullv kept 
and not have the badges lost as in the past. It seems 
to me the Secretary and Treasurer, which is one and 
the same person, would be the proper one. I make a 
motion that the report of the badge committee be filed 
and the committee discharged. 

Mr. Edwards — I second the motion. 

Mr. Wetzlar — I would like to amend that, just in this 
respect. That when the new Secretary enters upon his 
duties, that before issuing badges to the individual 
members, a separate account, called the badge account, 
be kept of the funds of the Association, so that the 
moneys will not be mixed up with the other moneys of 
the Association. 

Mr. Kinne — I think that is only a matter of detail. 

Mr. Watt — There is only one thing, I want to see the 
design; it seemed to me a little too large. 

The President — You can look at it here, if you wish. 

Mr. Watt — Of course it is larger than the old one. 

Mr. Kinne — There is the exact size of it and the 
shape to be seen on this piece of paper. 

Mr. Watt — A smaller size would be better; two-thirds 
that size, and the words Fire Underwriters could appear 
on the corner. 

It was moved and carried that the report of the com- 



FIRE UNDERWRITERS' ASSOCIATION. 187 

mittee on badges be adopted and the committee dis- 
charged. 

It was moved and carried that the Secretary and 
Treasurer be designated as the party to receive the 
badges from the Fire Commissioners and take charge of 
them. 

The meeting then adjourned. 



LIST OF MEMBERS. 



ACTIVE MEMBERS. 



Agard, J. J., Special Agent, Hartford Fire Insurance Company. 

Anderson, Hugb, Adjuster, Salt Lake, Utah 

Andre, A. A., Special Agent, Providence-Washington Insurance Company. 

Ashe, W. L., Manager, Alta Insurance Company. 

Ashton, Geo. F.. Special Agent, Orient Insurance Company. 

Bailey, J. D., Secretary, Union Iasurance Company. 

Bates, Le-ley, Special Agent, Rolla V. Watts' Agency. 

Beck, J. M., Special Agent, Ins. Co. of North America. 

Belden,. H. K., Manager, Hartford Fire Insurance Company. 

Bertheau, C, Manager New York Underwriters. 

Bertheau, Max A., Special Agent, New York Underwriters. 

Boardman, Geo. C, General Agent, JEtna Insurance Company. 

Bokee, D. M., Special Agent, T. A. Mitchell's Agency. 

Bosqui, E. L., General Agent, Oakland Home Insurance Company. 

Boyd, H. C, Special Agent, Rudolph Herold's Agency. 

Brander, George L., President, State Investment and Insurance Company. 

Bromwell, L. L., President, California Insurance Company. 

Brown, E., General Agent, Phoenix, American, Pennsylvania, and State of 
Pennsylvania Insurance Companies. 

Burgard, John H., Special Agent, with Geo. A. Steel & Co.'s Agency, Port- 
land, Oregon. 

Bush, D. B., Jr., General Agent, Home Mutual Insurance Company, Port- 
land, Oregon. 

Butler, Gfto. E., General Agent, Phoenix Assurance Company of London, 
and American Fire of New York. 

Callingham, W. J., General Agent, City of London, and Scottish Union and 
National Insurance Companies. 

Carpenter, E. W., General Agent, Royal and Norwich Union Insurance 
Companies. 

Chalmers, W. L., Fire Insurance Adjuster. 

Cofran, J. W. G., Manager, Hartford Fire Insurance Company. 

Conrad, J. G., General Agent, Oakland Home and Traders' Insurance Com- 
panies. 

Craig, Homer, A., General Agent, Brown, Craig & Co. 

Cushing, Chas. H., Secretary, State Investmeut and Insurance Company. 

Dercksen, B., Manager, Scania Insurance Company. 

DeVeuve, James H , Special Agent, Geo. F. Grant's Agency. 

Dibbern, J. H.. of Manheim, Dibbern <fc Co., City Agents. 

Dick, B. C, Special Agent, Sun Insurance Company. 



190 FIFTEENTH ANNUAL MEETING OF THE 

Dickson, F. W., General Agent, Manufacturers and Builders' Fire Insurance 
Company. 

Dickson, Robert, Manager, Queen and Connecticut Insurauce Companies. 

Dohrman, C. W., General Agent, Alta Insurance Company. 

Donnell, A. C , General Agent, Okell & Donnell Agency. 

Dornin, Geo. D., Manager, Imperial, Lion and Natioual Fire Insurance 
Companies. 

Dornin, Geo. W., Special Agent, Imperial, Lion and National Fire Insur- 
ance Companies. 

Driffield, V. C, Special Agent, London and Lancashire Iusurance Co. 

Dutton, W. J., Vice-President Firemans Fund Insurance Company. 

Easton, Geo., General Agent, Geo. Eastou & Co.'s Agency. 

Edwards, L. B., Superintendent of Agencies, with Balfour, Guthrie & Co.'s 
Agency. 

Farnfield, C. 1\, Fire Insurance Adjuster. 

Farnsworth, Ed. P., General Agent, Jacobs & Easton Agency. 

Faymonville, Bernard, Secretary Firemans Fund Insuiance Company. 

Fenn, Thos. W., Manager, Svea Fire Insurance Company. 

Fennel, Henry T., Special Agent, Commercial Insurance Company. 

Fogarty, J. T., Special Agent, B. V. Watt's Agency. 

Folger, Herbert, Manager, Portland Branch, New Zealand Insurance Co. 

Foster, W. B., Special Agent, Westchester Insurance Co. 

Fowler, W. H. C, Secretary, California Insurance Company. 

Frank, Wm., General Agent, Gutte and Franks' Agency. 

Gartner, A. F., Special Agent, Phoenix and Home Insurance Companies, 
Portland, Oregon. 

Gibbons, W. H , Special Agent, Brown. Craig <fe Co.'s Agency. 

Gilcrest, Frank M., Special Agent, E. W. Carpenter's Agency. 

Grant, Geo. F., Manager, Loudon and Northern Assurance Companies. 

Grant, H. M., Secretary Northwest Insurance Company. 

Grant, Tom C, Manager, North British & Mercantile and German-American 
Insurance Companies. 

Gunnison, A. R., General Agent, Commercial Insurance Company. 

Gurrey, A. R., Manager, Newhall & Co.'s Agency. 

Haldan, E. B., General Agent, Phoenix of London and American Fire of New 
York Insurance Companies. 

Hall, O. N., Special Agent California Insurance Company. 

Harris, T. B., Special Agent, Firemans Fund Insurance Company. 

Haven, Chas. D., Resident Secretary, Liverpool and London and Globe In- 
surance Company. 

Herrick, W. F., Assistant Secretary, Commercial Insurance Company. 

Herold, Rudolph, General Agent, Hamburg-Bremen and Niagara Insurance 
Companies. 

Hewitt, Dixwell, Special Agent, Orient Insurance Company. 

Hicks, F. S., Special Agent, Commercial Union Assurance Company. 

Hillman, J. R., Special Agent, Rolla V. Watt's Agency. 



FIRE UNDERWRITERS' ASSOCIATION. 191 

Hirschfeld, David, General Agent, Prussian National Insurance Company. 

Hodgkin, Frank E., Insurance, Salem, Oregon. 

Hopkins, W. B., Special Agent, London & Lancashire Insurance Company. 

Houghton, J. F.. President, Home Mutual Insurance Company. 

Houghton, Jr., S. O., Adjuster, Los Angeles, Cal. 

Ives, S. D., Special Agent, Firemans Fund Insurance Company. 

Jacobs, Julius, General Agent, Jacobs & Easton Agency. 

Jacoby, Franz, General Agent, Prussian National Insurance Company. 

James, N. T., President, Union Insurance Company. 

Jennings, J. C, General Agent, J. C. Jennings & Co.'s Agency. 

Jolly, E. J., Special Agent, W. J. Callingham's Agency. 

Jones, Alfred, General Agent, Western Assurance Company. 

Kinne, C. Mason, Assistant Resident Secretary Liverpool and Loudon and 
Globe Insurance Company. 

Landers, W. J., Manager, Guardian Assurance Company. 

Lavery, J. G., Special Agent, Balfour, Guthrie & Co.'s Agency. 

Lockey, Richard, Adjuster, Helena, Montana. 

Lowdeu, Wm. H., Adjuster, North British and Mercantile and German- 
American Insurance Companies. 

Mackie, J. B., Special Agent, State Investment and Insurance Company. 

Magill, A. E., General Agent, Phoenix and Home Insurance Companies. 

Magill, R. H.. General Agent, Home Mutual Insurance Company. 

Mailliard, J. W., Insurance. 

Manheim, I.. City Agent, Manheim, Dibbern & Co.'s Agency. 

Mann, H. R., General Agent, Mann & Wilson Agency. 

Marshall, J. Jr., Special Agent, Robt. Dickson's Agency. 

Maxwell, J. D., General Agent, Oakland Home and Traders Insurance Com- 
panies. 

Meade, Calvert, Special Agent, W. J. Callingham's Agency. 

Mel, Geo., Adjuster, State Investment and Insurance Company. 

Mel, Louis, Special Agent, iEtna Insurance Company. 

Merrill, M. H., Special Agent, Oakland Home Insurance Company. 

Miles, D. E., Secretary, Southern California Insurance Company. 

Mitchell, Geo. M., Adjuster, New Zealand Insurauce Company. 

Mitchell, T. A., General Agent, Insurance Company of North America. 

Morrison, Ed. C. Special Agent, ^Etna Insurance Company. 

Mullins, C. F., Managtr, Commercial Union Assurance Company. 

Naunton, R. H., Adjuster, Okell, Donnell & Co. 

Niebling, E. T., Special Agent, Commercial Union Assurauce Company. 

Niles, Ed., General Agent, Union Insurance Company. 

Nippert, Paul M., Special Agent, Phoenix & Home Insurance Companies. 

Okell, Charles J , General Agent, British America Insurance Company. 

Otey, Mercer, Superintendent of Agents California Insurance Company. 

Outcalt, Peter, Secretary, Columbia Insurance Company, Portland, Or. 

Palache, Whitney, Special Agent, Hartford Insurance Company. 

Pope, T. E., Assistant General Agent, ^tna Insurance Company. 



192 FIFTEENTH ANNUAL MEETING OF THE 

Potter, E. E., Secretary and Treasurer, Sun Insurance Company of Cali- 
fornia. 

Pratt, Geo. C, Insurance. 

Rigijen, S, B., Special Agent and Adjuster, Portland, Or. 

Reynolds, Jas. N., Manager, Westchester Insurance Company. 

Sexton, Win., Assistant Manager, Imperial. Lion and National Insurance 
Companies. 

Smith, Ben. J., Special Agent, Robt. Dickson's Agency. 

Smith, H. Bronson, Special Agent, Caledonian Insurance Company. 

Snyder, A. A., Insurance Appraiser and Adjuster. 

Spencer, D. A., Secretary, Home Insurance Company of Seattle, W T ash. 

Spencer, Geo. W., Manager, Manchester, Caledonian and American Insur- 
ance Companies. 

Sprowl, E. G., Special Agent, Liverpool and London and Globe Insurance 
Company. 
' Staples, D. J.. President, Firemans Fund Insurance Company. 

Stillman, A., General Agent, Orient Insurance Company. 

Story, Chas. R. } Secretary, Home Mutual Insurance Company. 

Stuart, C. A., Special Agent, Robt. Dickson's Agency. 

Swett, Frank H.. Special Agent, U. B. Wilson's Agency. 

Thomas, W. P., Superintendent of Agencies, Commercial Union Assurance 
Company . 

Trezevant, J. T., General Agent, Dallas, Texas. 

Turner, G. W., General Agent, Northwestern National Ins. Co. 

Tyson. Geo. H., Assistant Secretary, Firemans Fund Insurance Company. 

Tyson, R. J., Special Agent, Firemans Fund Insurance Company. 

Vincent, Geo., Special Agent, Mann & Wilson's Agency. 

Warfield, R. H., General Agent, German Insurance Company. 

Watt, Rolla V., General Agent, American Central and Liberty Insurance 
Companies 

Wattles, J. B., General Agent, German Insurance Company. 

Weinmann, Louis, Special Agent, Firemans Fund Insurance Company. 

Wenzelberger, W., General Agent, Geo. Easton & Co.'s Agency. 

W etzlar, A. J., Fire Insurance Adjuster. 

Wheeler, Dalton, Adjuster. 

Whiteley, Henry M., Special Agent, Geo. Easton & Co.'s Agency. 

Wilson, D. B., General Agent, Continental Insurance Company. 

Wilson, J. Scott, General Agent, Mann & Wilson's Agency. 

Wilson, U. B., General Agent, Providence-Washington, Security and Roches- 
ter German Insurance Companies. 

Wright, H. E , Special Agent, Newhall & Co.'s Agency. 

Young, Frank \V., Special Agent, Home Mutual Insurance Company. 



FIRE UNDERWRITERS' ASSOCIATION. 193 

HONORARY MEMBERS. 

Broderick, W. J.. Insurance Agent, Los Angeles. 

Conroy, T. J., Assistant Manager, Pacific Insurance Union. 

Dudley, W. W., Illinois State Agent, Germ an- American Insurance Company 

Duval, W. S., Manager Pacific Insurance Union. 

Edwards, J. G , Editor Coast Review, 320 Sansome street, San Francisco. 

Hine, C. C, Editor Insurance Monitor, New York. 

Hopkins, C. T., late President, California Insurance Company. 

Jack, A. Hill, General Manager, National Insurance Company of New Zealand. 

Kirby, D. L., No. 1 Pine street, New York City. 

McLellan, G. F., Insurance Agent, Los Angeles. 

Olmstead, W. N., 62 Cedar street, Room 10, New York. 

Smith, A. D., Manager, Oakland Branch, Pacific Insurance Union. 

Winne, Peter, Insurance Agent, Denver, Col. 



Fire Underwriters 1 Association 

OK THE PACIFIC. 
OFFICERS FOR 1891. 

W. H. LOWDEN, President 

H. M. GEANT, Vice-President 

GEO. H. TYSON, Secretary 

EXECUTIVE COMMITTEE. 

H. K. BELDEN, GEO. EASTON, ALFEED STILLMAN. 



^m. 




; Perhaps upon the road to Glory 
May go the Special,— and his gripr 

—The Knapsack. 



.1 I 



London I :. k 



PROCEEDINGS 



SIXTEENTH ANNUAL MEETING 



Fire Underwriters' Association 



OF THE PACIFIC. 



..AJ/^. 




San Francisco, February 16th and 17th, 1892. 

Printed toy Order of the Association. 
1892. 



PRESS OF 
S. CROCKER COMPANY 
SAN FRANCISCO. 



FIRE UNDERWRITERS' ASSOCIATION 

OF THE PACIFIC. 

Sixteenth Annual Meeting:. 



Contents. 



Page. 

Annual Report Edward Niles, Secretary and Treasurer 6,7 

Report of Executive Committee H. K. Belden, Chairman 12 

Annual Address W. H. Lowdex, President 12 

Looking Backward James H. De Veuve 21 

Special Agents Edward Niles 24 

The Specicd and the Compact A. A. Andre 3 1 

Fire Patrols, etc Ciias. A. Laton 34 

The Growth of Tariff A ssociations Herbert Folger 39 

The Benefits of Fire Insurance as Collateral Wm. Sexton 76 

The Boiler Risk in Special Hazards J. D. M axw ell 84 

Professional Errors P. Outcalt 89 

The Trials and Tribulations of a Local Insurance Agent... G. W. Harney 97 

The Evils of Open Insurance J. A . M arston 100 

The Written Part of the Policy Edward Brown i 09 

The Insurers' Liability on Buildings in Course of Construction 

,. Bernard Fa ymonyille 115 

Garnishments Before Proofs V. C. Driffield 130 

A ttachments or Garnishments Before Proofs A. J . Wetzlar 135 

Past Pleasures vs. Present Comforts \. K. Gunnison 143 

What Do We Learnt H. M. Grant 149 

The A ssociation and the Compact W. S. Duyal 156 

The Hazards of Artificial Ilium ination Geo. P. Low 1 59 

Adjustment Before Loss L. B. Edwards 175 

After the Compact,— What? Geo. D. Dornin 193 

r l he California Knapsack Geo. F. Grant, Editor 204 

Report of Committee 22 7 

Election of Officers 22 9 

The Fire Hazard of Electricity Geo. P. Low 233 

Adjusters' Charges 2 9 4 

Library Catalogue 2 97 

List of Members 3° 2 

Officers for 1892 3°8 



$ 



fiu l§\\Attw\Ut$ ^oortatiait of \\\t patifrr, 



SAN FRANCISCO, CAL,. 



OFFICERS FOR THE YEAR 1891, 



W. H. LOVYDEN, 
II. M. GRANT, 
EDWARD NILES, 



President. 

Vice-President. 

Secretary. 



executive committee. 
H. K. BELDEX, GEO. EASTON, ALFRED STILLMAN. 

library committee. 
GEO. W. SPENCER, E. W. CARPENTER, A. J. WETZLAR. 



GEO. F. GRANT, 



CALIFORNIA KNAPSACK. 



Editor. 



FIRE UNDERWRITERS' ASSOCIATION 



OF THE PACIFIC. 



The sixteenth regular annual meeting of the Fire 
Underwriters' Association was held in accordance with 
the By-Laws, and upon notice by the Secretary, at the 
Assembly Rooms, No. 307 Sansome Street, San Francisco, 
California, on the 16th and 17th of February, 1892. 

There were noted as being present during the session 
the following gentlemen: 



A. A. Andre, 
W. L. Ashe, 
Geo. F. Ashton, 
H. K. Belden, 
H. H. Bigelow, 
H. F. Carey, 

E. W. Carpenter, 
J. W. G. Cofran, 
J. G. Conrad, 
Thos. J. Conroy, 
H. A. Craig, 

B. Dercksen, 
B. C. Dick, 



Geo. D. Dornin, 
L. B. Edwards, 
E. P. Farnsworth, 
Bernard Faymonville, 
H. T. Fennel, 
J. T. Fogarty, 
Herbert Folger, 

of Portland, Or. 

Wm. Frank, 
G. F. Grant, 
H. M. Grant, 
Heber J. Grant, 

of Salt Lake City. 

J. K. Hamilton, 



SIXTEENTH ANNUAL MEETING OF THE 



W. H. Hill, 
J. R. Hillman, 
S. D. Ives, 
C. Mason Kinne, 
J. G. Lavery, 
Geo. P. Low, 
W. H. Lowden, 
J. B. Mackie, 
F. H. McElhone, 

of Texas. 

R. C. Medcraft, 
T. L. Miller, 
Thos. A. Mitchell, 
Edward Niles, 
F. N. Rust, 
F. H. Swett, 
A. F. Sewell, 
Wm. Sexton, 



A. D. Smith, 

B. M. Spencer, 

D. A. Spencer, 
Walter Speyer, 

E. L. Thompson, 

of Portland, Or. 

A. H. Trathen, 
Geo. W. Turner, 
Geo. H. Tyson, 
R. V. Watt, 
Louis Weinmann, 
A. J. Wetzlar, 
Frank G. White, 

of Denver. 

D. B. Wilson, 
H. M. Wheeler, 

of L,os Angeles. 

John Scott Wilson, 
U. B. Wilson. 



The meeting having been called to order, the President 
announced that the first thing on the programme was 
the annual report of the Secretary and Treasurer. 



SECRETARY'S REPORT. 

San Franc r sco, February 16, 1892. 
To the Fire Underwriters" Association of the Pacific : 

Mr. President and the Members of the Association, Gentle- 
men : I have the honor to submit this my annual report as Secretary for 
the fiscal year ending February 15, 1892. 

Mr. George H. Tyson resigned the secretaryship on August 19, 1891, 
owing to the pressure of other duties. Since that time I have filled the 
position to the best of my ability, although I was not regularly elected 
Secretary and Treasurer until October 20, 1891. 

Number of honorary members February 17, 1891, 13. 
Number of honorary members February 16, 1892, 13. 
Number of subscribing members February 17, 1891, 143. 
Number of subscribing members February 16, 1892, 172. 



FIRE UNDERWRITERS' ASSOCIATION. 7 

RESIGNATIONS DURING THE YEAR. 

H. W. Cole, March, 1891. 

R. J. Fabj, March, 1891. 

H. Wilmerding, December 7, 1891. 

H. M. Whiteley, January 7, 1892. 

DEATHS DURING THE YEAR. 

C. P. Farufield, April, 1891. 
A. A. Snyder, January 12, 1892. 

Very respectfully yours, 

EDWARD NILKS, Secretary. 

On motion'the report was received and placed on file. 

The President — The next will be the report of the 
Treasurer. 

TREASURER'S REPORT. 

San Francisco, February 16, 1892. 
To the Fire Underwriters^ Association of the Pacific : 

Mr. President, and the Members of the Association, Gentle- 
men : I have the honor to hand you, herewith, my report as Treasurer for 
the fiscal year ending February 15, 1892 : 

Balance on hand at last report $ 548 55 

Receipts 1,181 90 

Total receipts $1,730 45 

Disbursements $1,688 64 

Balance, cash in Bank of California, as per 

teller's receipt $ 41 81 

The detailed statement of receipts and expenditures appended has been 
examined and approved by the Executive Committee. 

During the past year the new rooms have been furnished. All bills for 
furniture and fittings have been paid. 

The rental of the new rooms is $32.50 per month. The rooms are sub- 
rented to the Underwriters' Clerks' Association at $10 per month. 

I suggest that it will be well for the members to endeavor to add as 
many new members as possible, in order to be able to fully meet the 
expenses of the coming year. 

Very respectfully yours, 

EDWARD NILES, Treasurer. 



8 SIXTEENTH ANNUAL MEETING OF THE 

REPORT OF EDWARD NILES, 

TREASURER OF THE FIRE UNDERWRITERS' ASSOCIATION OF THE PACIFIC, 
FOR THE FISCAL YEAR ENDING FEBRUARY 15, 1 892. 

February 17, 1891. Balance on hand from the fiscal year end- 
ing February 16, 1891 $ 548 55 

RECEIPTS. 
1891 
Feb. 20 Ten copies proceedings sold to H. Folger . .$ 5 00 

27 Balance received from Banquet Committee . 19 15 

27 Entrance fee and dues, Nos. 393, 394 .... 20 00 

27 Dues, Nos. 395-397 15 00 

Mar. 20 Dues, Nos. 398-404 30 00 

(No. 400 spoiled.) 

20 Entrance fee and dues, Nos. 405, 406 20 00 

April 11 Six copies proceedings sold 3 00 

11 Entrance fee and dues, Nos. 407-410 40 00 

11 Dues, Nos. 411-415 25 00 

20 Six copies proceedings sold 3 00 

May 12 Two copies proceedings sold 1 00 

Aug. 21 Dues, Nos. 416-442 135 00 

21 Dues, Nos. 443-448 30 00 

21 Dues, Nos. 449-500 260 00 

21 Entrance fee and dues, Nos. 501-503 .... 30 00 

21 Dues, Nos. 504-508 25 00 

(No. 509 unpaid.) 

21 Dues, Nos. 510-526 85 00 

(No. 527 unpaid) 

21 Dues, Nos. 528-535 40 00 

21 Entrance fee and dues, Nos. 536-538 30 00 

(No. 539 unpaid.) 

21 Entrance fee and dues, Nos. 540-543 40 00 

21 Dues, No. 544 5 00 

21 Entrance fee and dues, Nos. 545-546 .... 20 00 

21 Three copies proceedings sold 1 50 

Oct. 1 Rent, Clerk's Association for months of July, 

August, September and October 40 00 

Nov. 13 Same for November 10 00 

13 Entrance fee and dues, No. 547 7 50 

Dec. 7 Rent, Clerk's Association for December 10 00 

14-30 Entrance fee and dues, Nos. 548-553 37 00 987 15 

Carried forward $i,5^5 7° 



FIRE UNDERWRITERS' ASSOCIATION. 

l892 Brought forward $1,535 70 

Jan. 5-22 Entrance fee and dues, Nos. 554-557 .... 23 25 

15 Three copies proceedings sold 1 50 

29 Rent Clerk's Association for January 10 00 

Feb. 4 Same for February 10 00 

!89i KEY ACCOUNT. 

Feb. 17 Number of keys on hand, 40. 

1892. 
Feb 15 Number of keys on hand, 10. 

Number sold, 30 at 25 cents $ 7 50 

6 Entrance fee and dues, Nos. 558-560 16 50 

8 Badges sold during year, Nos. 1 to 63. inclu- 
sive, $2.00 126 00 



Total $1,730 45 

I 8 9 i. EXPENDITURES. 

Feb. 20 Paid E. E. Parlin, stenographer $ 70 70 

20 u R. H. Naunton, services as Sec'y, 1890. 100 00 

27 " Delivering monthly notices ...... 50 

Mar. 2 " D. S. Stanley & Co., printing 19 75 

2 Cl Dutton & Partridge, envelopes .... 1 25 

3 " Postage 5° 

3 " 2 6 5 

5 " Delivering notices adjusters' charges . 50 

5 ' ' Dakin Publishing Co. , Knapsack ... 7 00 

11 " D. S. Stanley & Co., printing 1250 

20 " Delivering notices 1 00 

April 11 '" Delivering notices 1 00 

11 " Postage 2 95 

20 " The Underwriter 3 10 

20 " D. S. Stanley, printing 15 25 

21 " California Insurance Co., insurance . . 5 40 

22 " Spaulding & Co., printing annual pro- 

ceedings 3 J 3 x 4 

May 1 " Insurance World ........ 3 °° 

1 " Dutton & Partridge, printing 3 5° 

2 ll The Spectator 4 00 

6 " Delivering notices 5° 

7 " Delivering notices 5° 

21 " D. S. Stanley & Co., printing 170° 

Carried forward $ 5^5 69 



10 SIXTEENTH ANNUAL MEETING OF THE 

tSgi. Brought forward $585 69 

May 21 Paid Delivering notices 1 00 

June 3 " Postage 3 00 

3 " Delivering notices 1 00 

14 " D. S. Stanley &Co., printing 8 00 

July 1 " Rent, June ............. 32 50 

1 " Rent, July 32 50 

2 " Delivering notices , 60 

21 " Delivering and addressing notices . . . 2 50 

24 " Printing, D. S. Stanley & Co ... . 3 50 

24 " Addressing notices, June 2 00 

Aug. 4 " Rent, August 32 50 

" Michigan Furniture Co 11 00 

' ' California Gas Fixture Co 33 50 

" S. C. Partridge 9 50 

" Max Burckhardt 27 50 

" J. Todt, keys 8 00 

k ' C. A. Garthorne 6 00 

' ' Addressing envelopes, July 2 00 

" Delivering envelopes, July 50 

" Postage • .- 1 00 

" Hopps & Sons 6 00 

" H. Peulecka 10 25 

" J. B. Purse, porter, wages two months . 10 00 

' ' Addressing envelopes 2 00 

Sept. " Postage 174 cards, "Adjusting Expenses" 348 

" Postage 174 Indexes of Proceedings . . 3 48 

" Addressing and delivering envelopes, two 

lots 2 50 

" Rent, September 32 50 

Oct. " Rent, October 32 50 

" J. B. Purse, wages, September 5 00 

" Sterling Furniture Co 6 75 

" Jos. Fredricks & Co 378 02 

" Addressing and deliv'g two lots notices. 2 50 

Nov. 2 " Coast Review, Jan., '89. to Jan., '91 . . 6 00 

2 " Rent, November 32 50 

3 " J. B. Purse, wages, October 5 00 

3 " Addressing and delivering tw r o notices 

of meeting and Manager's Desk . . 2 50. 

3 li Postage 1 00 

5 " Dutton & Partridge, Adjusters' Record 2 13 

11 " Stanley & Co., printing, July to August 21 25 

Carried forward $ r >369 15 



FIRK UNDERWRITERS' ASSOCIATION. 



11 



1891. Brought forward 11,36915 

Nov. 16 Paid Postage 132 notices, second notices . 

Envelopes 

Dec. 1 " Rent, December 32 

J. B. Purse, wages, November .... 

Extra help moving to new rooms . . . 

Cunningham, Curtiss & Welch, stat'y . 

J. B. Purse, extra help 

Max Burckhardt, frame 

D. S. Stanley & Co., printing 

Addressing and deliv'g two lots notices. 



1892. 



Jan. 



30 
1 
2 
16 
16 
16 
16 
28 
28 

2 
2 
2 
2 
2 
2 
19 

3i 
3i 



2 


64 




60 


32 


50 


5 


00 


1 


50 


2 


90 


2 


00 


1 


75 


3 


25 


2 


50 


32 


50 


5 


00 


1 


00 


2 


50 


10 


00 


1 


00 



Rent, January 32 

J. B. Purse, wages, Dec, '91 

J. B. Purse, feather duster 

J. B. Purse, E. Gallagher, painting . . 
J. B. Purse, Searle&McClinton, print 'g 
J. B. Purse, Searle & McClinton, print'g 
J. W. Southwell, music A. A. Snyder's 

funeral . . . • 20 00 

Podesta & Co., floral piece 15 00 

Addressing and deliv'g two lots notices. 2 50 

Feb. 1 k ' Rent, February 32 50 

J. B. Purse, wages, January 5 00 

Postage two lots notices to outside mem- 
bers 

Addressing and delivering two notices 

of meeting 

4 " Coast Review, Jan. to Dec, '91 ... . 
zj. " Typewritten copy Treasurer's Report . 
4 " Addressing and wrapping 174 " Adjust- 
ing Expenses," September 

Addressing and wrapping 174 "In- 
dexes," September 

Addressing and delivering 190 notices 
annual meeting and dinner . . . 

8 ' ' For badges, Nos. 1 to 63 inc. , at $2 

Balance, cash in Bank of California, as 
per teller's receipt 

Totai, ~~ $i,730 45 

On motion the report was received and placed on file. 



1 60 

2 50 

3 00 
1 00 

1 25 

1 25 



I 


25 




5126 


$1 

00 


,562 64 




$1 


,688 64 
41 81 



12 SIXTEENTH ANNUAL MEETING OF THE 

The President — The next in order is the report of the 
Executive Committee, Mr. H. K. Belden, Chairman. 
Mr. Belden is not present, but he has handed me his 
report, and the Secretary will please read it. 

REPORT OF THE EXECUTIVE COMMITTEE. 

Mr. President and Gentlemen: Upon examination of the books 
and vouchers of your Secretary and Treasurer, same have been found 
correct and have been duly audited. Expenditures during the year 
have exceeded those of 1890 in the sum of $849.50, about $500 having 
been expended in the furnishing of association rooms, $203.50 for rent 
thereof since June first, and about $150 additional for printing. 

To meet the increased expenses of the ensuing year occasioned by 
renting separate rooms for the association, it will require the member- 
ship to be increased to at least 200, and action should be at once taken 
to secure from 25 to 30 new members. 

The large gain in membership during the past year is very satisfac- 
tory, same having increased from 143 to 172, a gain of 29. 

The committee would recommend that the usual action be taken, in 
accordance with the provisions of the Constitution, relative to mem- 
bers who have become ineligible. 

Respectfully submitted, 

HENRY K. BELDEN, Chairman. 

On motion the report was received and placed on file. 

The President — The next item on the programme is 
the annual address of the President. 

PRESIDENT'S ADDRESS. 

The duty devolving upon me as President of this association in 
addressing you at the close of the year can, in my opinion, be best dis- 
charged by referring briefly to what progress we have made and to our 
present condition, and more fully to what claims the future has upon us 
and how these claims should be met. 

It is not necessary to dwell upon the results of the business on this 
Coast in 1891, as they are already known to you all. However, a reca- 
pitulation of the gross figures is worth preserving in our association 
records. The showing is as follows : 

The premium income of all companies for California amounted to 
$6,721,488, and the losses to $2,433,382, a ratio of a trifle over thirty-six 
per cent. The territory included in the Pacific Coast outside of Cali- 
fornia yielded $4,888,902, with losses amounting to $1,856,556, a ratio of 



fire; underwriters' association. 13 

nearly thirty-eight per cent, thus maintaining the record which this 
State has held, with only three exceptions, during the last twelve years, 
of a lower loss ratio than her sister States and Territories. 

The grand totals for the Coast are: Premiums $11,610,390; losses 
$4,289,938; and the ratio of losses to premiums 36.95 per cent. Com- 
pared with the figures of 1890, these show an increase in premiums of 
$1,138,552, while the increase in losses is only $60,076, being a decrease 
in loss ratio of 5.35 per cent. 

In view of the disastrous experience of our friends in the East during 
the past year, the underwriters of this Coast have excellent reason to 
congratulate themselves on their ability and foresight, or else must 
thank good fortune for the results, I am uncertain which. However, 
we will leave these figures to* be digested, possibly with a touch of dys- 
peptic envy, by our fellow- workers on the Atlantic Coast, and turn to 
our more personal affairs. 

It is with deep regret and unaffected sorrow that we are compelled to 
place, in advance of what good the year has brought us, the loss by 
death of two of our valued members. The first to leave us was C. P. 
Farnfield, at one time Secretary, and for many years an active member, 
of this association. A capable underwriter, a hard worker, a faithful 
friend, we cherish his memory and think this world not all bad when 
such men as he are in it. 

It is but yesterday we were forced to part with A. A. Snyder. His 
departure has left a vacancy in our ranks impossible to fill, nor would 
we fill it if we could. It is better to think that he is still with us, that 
he is only "out of town," and that he will be one of the number when 
the next big fire calls us together. For the present, at least, any other 
conclusion seems repugnant ; and until time heals the wound, and the 
question of " where' s Snyder? " ceases to rise to the lips, we do well to 
deceive ourselves. 

The bright side of the picture is presented in the report of the Secre- 
tary, from which we gather that we have increased our strength by the 
addition of thirty-five new and desirable members, and have lost but 
four by resignation, a very low loss ratio surely. 

While our financial condition is not such as would seem to call for any 
increase in the bonds of the Treasurer, still we should not be unhappy, 
as we have something to show for what was spent, and money is but 
dross anyway. 

The principal expense, outside of the customary printing bills, was 
incurred by the renting and furnishing of new rooms for the use of the 
members. At the monthly meeting held in April last, a committee was 
appointed with full authority to secure comfortable quarters for a 
library and meeting room. This action was taken for various reasons. 
It had been a pet subject for discussion at the annual meetings for 



1 4 SIXTEENTH ANNUAL MEETING OF THE 

years, and always seemed to be favorably received. The books in the 
library were inaccessible to the members, and, therefore, practically 
useless. We were indebted to the P. I. U. for a meeting room, and 
while we could, presumably, continue this obligation indefinitely, still a 
feeling of independence prompted a change, and, lastly, the condition 
of the treasury made it possible to accomplish the object without serious 
inconvenience. Rooms were secured at a low rent, and comfortably 
furnished, and the association now has a local habitation as well as a name. 

In this connection it is not out of place, perhaps, to indulge in a 
mild criticism of the Library Committee. After removal to our new 
quarters that body was requested by the association to appoint a 
Librarian, who should take charge of our books and papers, and keep 
them in proper shape ; but, up to the present, no action has been taken 
in the matter. It is necessary for the preservation of our library — which 
has become quite valuable — that some one be authorized to attend to 
the binding of the different magazines at the proper time, and to take 
general charge of the books, and keep them in order. There should 
not be the slightest difficulty in filling the office, as many of our younger 
members would, without doubt, cheerfully devote some of their spare 
time to the work, if requested by the committee to do so. It is to be 
hoped that some action will be taken at once. 

In line with this, a good work was voluntarily undertaken and suc- 
cessfully completed by one of our members. The index to the publi- 
cations comprising the record of our annual proceedings was carefully 
brought up to date, and, having been printed, was distributed to the 
members. To those fortunate enough to own these publications the 
index is invaluable, and the gentleman who placed it in our hands is 
entitled to our gratitude. 

I am pleased to be able to report that the question of badges, which 
was acted upon at the last annual meeting, has, during the year, been 
satisfactorily settled. The new badges, which can be obtained from the 
Secretary by those members who wish them, are fully recognized by the 
authorities as entitling the wearer to admission within the lines at a 
fire ; and it is to be hoped that this privilege will not be abused, as was 
the case when the old ones fell into the hands of, and were worn by, 
people not entitled to their possession. 

The much vexed question of adjusters' charges engaged our attention 
at the monthly meetings during the early part of the year ; and a com- 
mittee was appointed to formulate rules which might govern these 
charges in the absence of specific agreements between companies. It 
was felt that the rules in force were not being lived up to, that they 
were fruitful of disputes between adjusters and managers, that excessive 
charges could be made while complying with them, and that the com- 
pensation was, in some cases excessive. 



FIRE UNDERWRITERS' ASSOCIATION. 15 

The recommendation of this committee did not meet the views of the 
association, and another was appointed. The new committee submitted 
its plan to the managers for approval before presenting it to the associa- 
tion, and received almost unanimous indorsement from those who 
responded. The association then adopted the new rules, and it is 
believed that they are satisfactory, since an experience of five months 
has failed to record an objection. 

The difficulty, annoyance, and, withal, the importance of obtaining a 
list of all companies interested in a fire immediately after it occurs, have 
been recognized for a long time. This was discussed at our monthly 
meetings, and a number of plans suggested to remedy the disorder. 
Finally it was agreed that a register should be kept with the manager of 
the P. I. U., in which could be recorded the names of the companies 
interested in each fire, together with any information regarding the prox- 
imity of an adjuster which the managers might possess. All the offices 
were supplied with blanks and invited to co-operate ; and, while but few 
have so far availed themselves of the opportunity, still it is hoped that 
the practice will spread and time and trouble be saved to all. 

The unsatisfactory wording of the watchman's clause authorized by the 
P. I. U., and in use on this Coast, received our attention. The committee 
appointed to improve the form, after careful investigation of the various 
decisions, and consultation with Mr. Van Ness, submitted the following : 

11 Warranted by the insured that, during such time as the within- 
described buildings or works are idle or not in operation, whether closed 
for repairs, or during the absence of workmen, or otherwise (except as 
otherwise herein provided), one or more watchmen shall be on duty con- 
stantly, day and night, in and immediately about the said buildings or 
works ; and, if the said buildings or works shall at any time remain 
shut down for more than thirty (30) days, notice shall be given this com- 
pany, and permission to remain so shut down be obtained and indorsed 
hereon, or this policy shall be null and void." 

We have every reason to believe that this will clearly express the 
intention of the insurer, and bind the insured to comply with the con- 
ditions under which the suspension of operation is permitted. Being 
adopted by the association, the clause was submitted to the P. I. U. and 
its approval recommended. 

A determined effort was made during the latter half of the year to 
awaken interest in our monthly meetings, and secure a proper attendance 
thereat, with, I regret to say, but little success. A few members attended 
the meetings with commendable regularity, and seemed always ready to 
advance the interests of the association, but the great body threw cold 
water on everything by ignoring all appeals and inducements to be present. 

This was, most unfortunately, apparent during the delivery of a series 
of lectures on Electricity and Its Relation to Our Business, by Mr. Geo. 



16 SIXTEENTH ANNUAL MEETING OF THE 

P. Low, Electrical Inspector of the P. I. U. These lectures were prepared 
by Mr. Low in response to my invitation as President ; and without fee 
or reward he devoted much time and labor to the work. His kindness 
was met by scanty audiences and a vote of thanks. 

Mr. L. M. Johnston favored us with a paper on Automatic Sprinklers 
from the Underwriters' Standpoint, at the November meeting; but this 
also failed to draw a respectable audience. 

The time of meeting was changed from evening to the afternoon in the 
hope that members would find it more convenient, but the hope was not 
realized. Altogether the results of our efforts in this direction have been dis- 
apppointing, and my successor will be entitled to great credit if he can in- 
duce the members to take a more active interest in our monthly gatherings. 

Returning to the subject of Mr. Low's lectures, we are here in posses- 
sion of a most valuable series of papers on a 'live" topic. Their value 
has been recognized by the leading electrical journals of the country, 
which have reproduced them and given them editorial indorsement. As 
their utility to us, and to those who come after us, depends on their pres- 
ervation, I would strongly recommend that they be printed with our 
annual proceedings, and thus placed in our hands in available and per- 
manent form. 

The privilege of riding on freight trains, which is denied us on the 
roads of the Southern Pacific system, came up for consideration, and an 
effort was made to obtain a concession from that company. We urged, 
by letter and by personal interviews with the officers, our claims to this 
privilege, showing, as best we could, the importance to property owners 
of the early arrival of adjusters after a fire. We offered to waive claims 
for damages should accidents occur, agreed to travel only on first-class 
tickets purchased at regular offices, promised not to object if the engi- 
neer failed to stop the caboose in front of the station, referred to the 
airy nature of our baggage, and explained our easy identification by 
badges. We closed negotiations on receipt of a letter from General 
Superintendent J. A. Fillmore declining our request because the road 
could not consistently make an exception in our case. 

With this summary of what we either have done, or have attemped to 
do, I will pass to the consideration of what we have left undone. 

At the last annual meeting a paper on policy forms was read by Mr. 
Sexton. His suggestions induced the association to appoint a commit- 
tee to examine the subject and report. This committee has been granted 
further time from month to month, but has failed to make a recommen- 
dation. It seems to me, however, that it is doubtful whether any 
action on the part of the association looking to a change in the printed 
conditions of the policy is advisable. 

The credit evil was extensively considered during the previous admin- 
istration and a committee left in charge of the subject. It is to be 



FIRE UNDERWRITERS' ASSOCIATION. 17 

regretted that no solution of this difficult problem has been offered by the 
committee, as the evil is a menacing one and demands an immediate 
remedy. L,ike a cancer it is eating into the very vitals of our business, 
but upon the compact, and not on the association, should rest^the 
responsibility of dealing with it. Extended and unusual credit to the 
assured should be looked upon and treated as a deviation from the rules 
of the union, and punished with as much severity as a rebate of pre- 
mium. It is an undeniable fact (and every field man knows it) that long 
credit is openly offered by some agents as an inducement to the assured, 
so that others are forced into line for self-protection. The result is 
that, instead of decreasing in extent, the disease is becoming more 
aggravated. 

A cognate evil is the delinquent agent. He is the direct result of 
the long-credit competition, and is multiplying with alarming rapidity. 
He meets a demand for a settlement with the excuse that he has 
been unable to collect, and finding that this scheme works successfully 
begins to use the company's money for his own purposes. 

It is surprising how long he can continue to defer the discovery of his 
shortage if he is cool-headed and keeps his own counsel. The crash 
does not come until, by a fortunate combination of circumstances, two 
or three special agents stumble into his office the same day, bent upon 
the same errand. We then learn that the agent is hopelessly in debt; 
and a compromise, at once expensive and discreditable to the com- 
panies, follows the discovery. 

That both of these evils are well within the scope of the Pacific 
Insurance Union will be freely admitted by the sufferers, and it remains 
with them to urge vigorous methods for obtaining relief. 

While upon the subject of the Pacific Insurance Union and its 
acknowledged value, permit a brief but emphatic statement of a matter 
which, to my mind, is of great importance. / refer to a systematic 
classification by that organization of all premiums received and losses 
paid in the territory under its jurisdiction. 

The value of such a record has been recognized by every thinking 
underwriter on the Coast for many years, but nothing has been done 
to place it in our hands. 

After the Compact, What ? is the suggestive title of one of the papers 
to be read at this meeting, but it is doubtful whether the writer can 
point to any aftermath but regrets. If we could say that the compact 
left us a legacy in the shape of a correct understanding of the cost 
of our business during the term of its existence, we could bear its dis- 
solution with more fortitude than is possible under existing circum- 
stances. Apart from the value of these figures as a possible legacy, 
we should consider their importance as a means of supporting and 
strengthening the present organization. 



18 SIXTEENTH ANNUAL MEETING OF THE 

If our present rates are based on the experience of companies in 
Eastern communities, you do not need to be told that in numerous ways 
the hazard is entirely different. And if based on the Coast experience of 
a few pioneer companies, you must fully understand that rates thus estab- 
lished are not at all justifiable or expedient to-day. 

How often does the field man and agent meet with the assertion that 
" The rate is too high; your insurance monopoly has everything its own 
way and makes rates to suit itself;" and how oiten does the field man and 
agent wish he could point to authentic records and prove that the rate is 
correct. The real strength of our compact must, and will, lie in an 
equitable adjustment of rates, such as will convince the agent, and 
through him the assured, that the particular hazard assumed is not over- 
estimated, and that the charge is no greater than a fair profit demands. 

We are forced to admit that the public has but little confidence in our 
ratings, for the reason that we have nothing reliable to show in their sup- 
port. In the absence of proper statistics we cannot prove to them by 
facts and figures that detached frame dwellings are worth sixty cents per 
annum. Until we can do this we will always encounter the objection that 
insurance companies are making too much money. It is not enough to 
point in denial to general results and show that they are not ; the argu- 
ment of the other side will be, " My class of risk is overcharged ; you are 
not getting enough from the others !" 

We might, perhaps, safely ignore this popular criticism ; but how can 
we disregard the fact, that the companies themselves are not convinced of 
the exact value of some of the risks assumed ? Why are tariff associations 
and insurance compacts, which are entered into in all good faith to cor- 
rect evils and protect the capital of their members, so short-lived? 
Simply because the cost of the idemnity they are selling is not definitely 
known. Disastrous competition cannot exist in an}^ business, for any 
length of time, when the exact cost of the goods is known to the dealer. 
If this is so, the preservation of the compact is absolutely a necessity 
until we can secure a classification of the Coast business to which we can 
point as being correct, and which we can use to guard against ruinous 
competition among ourselves should the bonds which now unite us strain 
to the breaking point. 

If the companies knew exactly what it cost to carry every risk, there 
would be less danger of any manager naming too low a rate to the 
assured, or paying too high a compensation to the agent for securing it ; 
and both of these evils would stare us in the face should the unexpected 
happen. In my opinion, a golden opportunity has been lost during the 
years of the compact's existence, and a continued neglect of the facilities 
afforded is absolutely sinful. 

In making these assertions in favor of a more perfect system of ratings, 
it is not safe to ignore the opinion of those who look upon the existence 



FIRE UNDERWRITERS' ASSOCIATION. 19 

of tariffs with disfavor, who believe that their prolonged use will result in 
the members of the fraternity becoming mere machines for the trans- 
action of the business, and who declare that, in relying upon the rates 
laid down in a book, individual judgment is not exercised, and, in time, 
from very lack of use, becomes useless. 

I confess to an unqualified admiration for an experienced and able 
underwriter, for the cool-headed, far-seeing man who can look at a daily 
report and approve the good or reject the undesirable risk from the infor- 
mation the agent sees fit to lay before him. My years in the business 
have not been few, but they have been far too few to enable me to do this 
with a quiet conscience. 

Fire indemnity is claimed to be a science, but it has no right to the 
claim unless it is based on the very facts which the tariff objector dis- 
countenances. Science is " knowledge duly arranged and referred to 
general truths and principles on which it is founded, and from which it 
is derived." It is " penetrating and comprehensive information" 
regarding the subject; and fire insurance rates must embody these points 
if the claim is to be held good. 

Life insurance is a science, — based on scientific principles and ascer- 
tained facts. Fire insurance should be the same in so far as we can make 
it so. The life insurance manager or agent is not required to name an 
adequate rate for the risk he places on the books of the company, nor 
(within certain limits) should we. We should use similar means and 
adopt similar methods to those which the life actuary employs in fixing 
his rates. Let us make our " mortality tables " as perfect as they can be 
made, then load the premium for expense and profit, and name the rate. 

In the event of a disruption of the union, the rate book special and 
the rate book agent w T ould both be strong men in the business if the rate 
book were as perfect as it might be ; as the case stands to-day they are 
both but babes. In the event of such disruption, what man in your 
office is capable of standing at your counter and naming an adequate 
rate on any risk ? Whereas, how different it would be if the result of 
years of experience could give him at a glance the paying or losing 
figures. 

If it requires all the years and experience of a capable underwriter to 
fix an adequate rate, then we should not expect such judgment from the 
young man in the business ; yet he is compelled to do this in the absence 
of tariff ratings, and the anomaly is presented of an apprentice fixing 
the selling price of the goods. 

For many months this subject of exact ratings has been present in 
my mind asa" live ' ' topic of the business, and I have carried out the 
resolve of thus dwelling on it before you. It is with no little satisfaction, 
therefore, that I am able to point, in corroboration, to action taken quite 
recently by the New York State Association, the Middle Department 



20 SIXTEENTH ANNUAL MEETING OF THE 

and the New England Insurance Exchange, in appointing committees 
on " Non-paying classes of hazard," and virtually instructing these com- 
mittees to get together such information as will enable the members of 
the various associations to bring about a proper rating of all business. 

It is conceded that some classes of hazard are paying much less than a 
profitable rate, while others are claimed by some companies to be paying 
too much. The natural result of such an impression is the payment of 
excessive commissions to obtain the supposed profitable business, and 
demoralization ensues. 

These committees realize that rating associations have nothing to do 
with the question of commissions, but consider that, if rates are equal- 
ized, commissions will be also, and thus harmony will be fostered. 

It has been no part of my present purpose to transform that address, 
which time-honored precedent has demanded of each retiring presiding 
officer, into a species of underwriting text-book : we all know that this 
is beyond the accomplishment of any one man, however long he may 
have been identified with the business. Moreover, we shall soon listen 
to various criticisms, by certain specially able exponents, which cannot 
help being thoroughly valuable. And still I have felt that any honest 
suggestion will bear a useful result. I have tried to give you, in the 
main, a resume of " what we have accomplished/ ' and I bid you welcome 
to the expected recitals of what we yet must do. 

(Applause.) 

Mr. Folger — Mr. President: I would like to make a 
motion. I move you that the recommendations contained 
in the annual address of our President be referred to a 
committee of three, appointed by the chair, to report, 
before the close of this annual meeting, such resolutions 
as they may see fit to offer. 

Mr. George F. Grant — I second the motion. 

The President — It is moved and seconded that a com- 
mittee of three be appointed by the Chair to consider the 
recommendations contained in the President's address 
and report on same. Carried. 

I will nominate the committee later. 

The next on the programme is a paper entitled Look- 
ing Backward, by Mr. James H. De Veuve. I understand 



FIRE UNDERWRITERS' ASSOCIATION. 21 

that Mr. George F. Grant has the paper, and I will ask 
him to read it for us. 

Mr. George F. Grant — Mr. De Veuve regrets very much 
that he is not with you to-day, and, at the request of the 
President, I take pleasure in reading his paper to you. 

LOOKING BACKWARD. 

Mr. President and Gentlemen : During the past twelve months 
the fire losses in the United States have exceeded the enormous sum of 
$130,000,000. What multitudes would have been ruined, and how much 
despair, misery and absolute penury would have been wrought, had it 
not been for the protecting lines thrown around the merchant, manu- 
facturer and property holder, and by consequence around the clerk, 
laborer and other dependents, by that grandest of all modern sciences, 
fire insurance. 

It is interesting to go back to the origin of this science, and note the 
immense strides made since the year of our Lord 1240, when we have 
the first record of a plan for indemnity against losses by fire. In this 
year the following proclamation was issued by Thomas and Johanna, 
Count and Countess of Flanders : 

"In whatever house a fire shall have been secretly made, the whole 
place instantly makes good the damage through those whom the guar- 
dians select ; but, if the malefactor can be found out, he is banished for- 
ever, and the damage is made good out of his property : the residue 
indeed he yields up to the court. Truly he who can exculpate himself 
from the accusation will be commended by those guardians ; but until 
he can do so he is suspended. All his goods will be in the pleasure of 
the court, the damage being first restored to him who has the injury, 
if, however, he has first made complaint" (claim). 

This was known as the custom of Fames. The only trace left of this 
proclamation, in the present day, is that referring to the banishment of 
the malefactor. However, even when found out, our wheels of justice 
do not grind with that ease with which our forefathers were wont to 
keep theirs moving. 

Beckman, in his history of inventions, states: "It is perhaps known 
to few, a proposal was made in the early part of the seventeenth cen- 
tury (1609) that all the proprietors of land should insure the houses of 
their subjects against fire, upon their paying a certain per cent per 
annum on them. This proposition was advanced as a scheme of finance 
not to be found in any printed work." Same was rejected upon presenta- 
tion to the Count Von Oldenburg, owing to his religious scruples. In 
his rejection the Count makes the point : " God had without such means 
F. U.A. 2. 



22 SIXTEENTH ANNUAL MEETING OF THE 

preserved the ancient house of Oldenburg and blessed same for many 
centuries ; and He would still be present with him through his mercy, 
and preserve his subjects from serious fires." It is evident the proverb, 
"God preserves those who preserve themselves," w r as an unknown one 
in the household of this faithful nobleman. 

During the seventeenth century many financiers presented indemnity 
plans, but all seem to have been looked upon with the same degree of 
suspicion which w r e of the present day are inclined to cast upon mutual 
organizations. 

On the 2d day of September, 1666, the city of London was afflicted by 
what has gone down in history as the "Great fire of London." Pro- 
fessor Kirkwood says : ' ' Mutual fire insurance clubs, granting insur- 
ance not exceeding ^500 on a single risk, began to be formed the year 
after this fire, and continued for several years thereafter. ' ' 

It is therefore evident that the great need of pooling issues, with a 
view of individual or collective indemnity, began to manifest itself, and 
only required, to give it proper momentum, the appearance of some 
genius with sufficient ability to devise means by wdiich the many could 
save the few from ruin. At this period not only the entire financial and 
civil w T orld, but the powers as well, were more than ready to welcome 
that genius with open arms and bountiful support, providing the design 
furnished should be in accordance with the views of a selected committee 
of financiers. 

In the year 1670 Mr. Deputy Newbold, a member of the corporation of 
London, presented the following plan of insurance to the common coun- 
cil : There are twelve thousand new brick houses in the city, at the aver- 
age value of ^250. These insured at three per cent would be ^90,000 ; the 
annual interest at six percent would be ^5,400. The losses upon these 
houses, one year from another, since the fire of London, had not amounted 
to ^400 per annum, so that, allowing ^1,000 per annum for expenses, 
the profit to the city by this design is ^4,000. 

In the year 1680 a proposal appeared in one of the London papers pro- 
viding for the insurance against losses to houses by fire, "at an office in 
Threadneedle Street." 

During this year a very elaborate proposal for fire insurance appeared, 
which began and terminated as follows: "Since the propositions for 
insuring houses from fire at sixpence per pound rent for brick houses and 
twelve-pence for timber, for which ^ioo is to be paid out of the bank of 
the office for every ^10 insured, or else the house to be rebuilt at the 
charge of the office, as is at large expressed in the printed propositions, 
hath received approbation from many persons of great reputation and 
considerable owners of houses, as appears by their propositions, this paper 
is published to show the certainty of the propositions, the easiness of the 
terms and the interest of either landlord or tenant to insurance." Then 



FIRK UNDERWRITERS' ASSOCIATION. 23 

follows an elaborate display of figures, and the closing : "A man would 
part with five shillings or ten shillings in an ,^100, only to sleep quietly 
for a year and not be disturbed by that dismal cry of Fire ! Fire ! when 
himself is not in danger. to be burnt. Neither would a man, for such a 
small sum, if a loss should happen, be disquieted with the too late advice 
of friends, every one asking why he did not insure, or be tormented 
with his own thoughts with the wish, I had insured." 

Those of us who have passed apprenticeship in the local field can con- 
sole ourselves with the thought that we have followed a precedent of 
over two centuries' standing, when we have advanced the argument, 
-' Peace of mind is sufficient recompense for the cost of insuring. " 

In this year, in addition to the office in Threadneedle Street, an office 
was opened " On the back side of the Royal Exchange " for the insuring 
of houses. This office was subsequently known as the fire office. The 
gentlemen conducting the same were evidently not possessed of that 
degree of independence which characterizes the insurance man of the 
present day, or else they would surely have hung their shingle out on 
the front side of the Royal Exchange, or not at all. 

Beginning with the year 1700 many companies were formed ; and the 
favorite rendezvous of the various projectors seems to have been " Sam's 
coffee-house, back of the Royal Exchange." I have no doubt the fact of 
having a more "stimulating" place to meet at, in recent years, has 
resulted in the marked improvement shown in the business. 

From this period we have remaining the Sun Fire Office, the Union, 
the London Assurance, the Hand in Hand and the Royal Exchange, 
companies which have successfully weathered those tumultuous storms 
which wrecked so man}* barks of finance. 

Nor was the hat-passer element unknown in those olden days ; for in 
the year 171 1 we come across this advertisement : " Wherein every con- 
tributor, by paying six shillings per annum, becomes entitled to receive 
the value of ^100 loss, sustained by fire; and, if no loss by fire should 
happen, then such contributor, being by decay of business or other mis- 
fortune brought to penury or want, to be relieved out of the joint stock 
of this society." Probably the promoters of this enterprise flew the 
banner, -• Protection, inspection, subjection." At any rate we can find no 
further record of it, and have no doubt it went the same way as many 
like philanthropic concerns have gone in recent years. 

In the year 1729 our first troubles began. One Lynch sued the Sun 
Fire Office. The House of Lords held that the person insured must own 
the property at the time of the fire, or the company would not be liable 
to pay. (Assignment of policy.) 

We can only surmise that the problem of fire insurance, in the earlier 
days, was a matter of such moment that it not ouly engrossed the atten- 
tion of civilians as a matter for preservation of personal interests, but the 



24 SIXTEENTH ANNUAL MEETING OF THE 

attention of the most powerful government in the world as a means of 
preserving the kingdom from financial destruction. 

We have many so-called Napoleons of finance in the present day ; but 
certainly such men as Povey, Delaune and Newbold can only be ranked 
as Wellingtons of finance of the seventeenth century. 

We could dispense with the telegraph, steamboat and railroad, power- 
ful armies and immense navies ; but fire insurance cannot be dispensed 
with. It serves alike the rich and the poor, the strong and the weak. 
By its glorious principles the Grim Destroyer is foiled, ruin is averted 
and happiness prevails. 

And now, my fellow field-workers, let me add in conclusion . 

Remember we are following an honorable vocation, which requires 
honorable service to procure the desired result. 

Remember we do not offer our indemnity as a speculation, but as an 
absolute business necessity. 

Remember for six centuries and over the problem of insurance has 
been, not a profession, not a business, but a science. Yes ! a science, 
and one which not only requires study, but as much attention as the 
astronomer devotes to the stars, the surgeon to his scalpel, or "our" 
Edison to his electricity. 

JAS. H. DE VEUVE. 

(Applause.) 

Mr. Faymonville then introduced Mr. F. H. McElhone, 
of Texas, and Mr. Frank G. White, of Colorado, who 
were made welcome. 

Mr. Horace M. Wheeler, of Los Angeles, was then intro- 
duced by Colonel Kinne. 

The President — The next contribution we have on the 
programme is a paper entitled Special Agents, by Mr. 
Edward Niles. 

SPECIAL AGENTS. 

The long-suffering special agent has been freely discussed and criti- 
cised from the standpoint of the manager and the local agent, per- 
haps because he is a connecting link between the two, and is looked on 
by either as a kind of buffer, against whom all the mistakes of gen- 
eral and local management may be thrown. 

* 'A fellow feeling makes us wondrous kind;" and, having been an 
indifferent kind of a special agent for several years, I feel a peculiar 
interest in this subject, and believe that much may fairly be said on the 
other side of the question. 



FIRE UNDERWRITERS' ASSOCIATION. 25 

Special agents are largely the creatures of circumstances. Their 
environments, in most cases, determine their failure or success. Their 
ranks are generally recruited from local agents or from office men; 
and the new special, though he be a giant in intellect, cannot develop 
into a well-equipped field man unless first well grounded in theory, and 
continuously educated by the general agent to whom he reports. 

These suggestions, it will be understood, are designed in some meas- 
ure to benefit the "new special," — the young man flushed with en- 
thusiasm and eager to learn, whose modesty has not yet developed into 
the self-confidence born of a ripened experience, and who is about 
starting on the road, hopeful though diffident, a little uncertain on many 
points, zealous yet faint-hearted, but on the whole ambitious and 
determined to succeed. In imagination I can plainly see that gallant 
young man cheerily working his undaunted way through such centers 
of rustling activity as Decoto, Mission San Jose and Milpitas, bringing 
ii}") with a dull thud at Petaluma, reviving slightly at Benicia, and col- 
lapsing utterly at Gait. In time he will pleasantly recall these experi- 
ences, but when undergone they are bitter and depressing. 

For the first few months I was on the road I was probably one of the 
most energetic and inefficient special agents that ever traveled on corpo- 
ration money. There were times when I would rise from my corn-cob 
couch at Carpinteria or some other bucolic center of the bean industry, 
and, after smoothing out the corrugations caused by occupying the 
best bed in the hotel, would review my work for the past few weeks; 
and its results were so meager and apparently so barren of any good 
whatever that I would feel utterly discouraged. By persistence, and 
by being so fortunate as to have for my guide, counselor and friend an 
able and patient insurance manager, I did better in time. 

It appears to me that, in some offices, the new special is not sufficiently 
coached, but is expected to work out his own salvation. Would it not 
be better to carefully and patiently instruct him? Then, in due time, if 
he prove a failure, the fault is his own. 

In the beginning, I would suggest a general letter of instructions, 
something like the following, with such modifications as the different 
modes of procedure of different companies may require. 

GENERAL INSTRUCTIONS. 

Use the company's letter-heads for all communications to the office, 
in order to insure neatness and for convenient filing. 

Send all telegrams to the office "collect." 

For traveling expenses make a draft upon the company for an amount 

not exceeding dollars at any one time, stating on the draft 

that it is for "traveling expenses," and notify the company by mail of 
the intention to draw at least a day before mailing the draft. 



26 SIXTEENTH ANNUAL MEETING OF THE 

On the last day of each month mail a detailed statement of traveling ex- 
penses. 

Make a special report for each town visited, giving the name of the 
county. 

Examine the registers, policies and accounts of each agency, and make 
a detailed statement of the condition of the business, and particularly of 
"premiums outstanding." 

Report fully any matters of interest to the company, and give the 
names of the other companies represented in the agency. 

Report your route sufficiently in advance so that you can be reached 
by wire at any time. 

Don't get lost on the road. When a special agent is wanted he is 
wanted immediately. Be careful to notify the office of your route for 
at least three days ahead. 

Overhaul all supplies in the hands of agents. Instruct them fully as 
to the manner of filling out the different blanks and their uses. 

On requisitions for supplies, observe the proper proportions. Do not 
order blotters in lots of less than one hundred, or more than two hun- 
dred for ordinary agencies. The following proportions are recommended 
for small agencies : 

25 policies, 25 envelopes (large addressed), 

40 daily reports, 25 envelopes (small addressed), 

20 endorsements, 50 letter-heads, 

15 accounts current (small), 100 blotters. 

15 dwelling-house surveys. 

Do not promise supplies not in stock. If special supplies seem 
necessary notify the office. 

Do not change agents unless satisfied that it will be for the benefit of 
the office. 

Give a reason for the removal of the agent in each case. 

Give the occupation of the new agent, the date of appointment, and 
the names of the companies he represents (if any) besides ours. 

If a firm, give the individual names of the members. 

Get a bond from the agent whenever practicable. 

Never appoint an agent who is incapable of properly conducting the 
business, or whom you do not consider entirely responsible for the 
position he is to occupy. Do not appoint doctors, lawyers or school 
teachers as agents, unless authorized by the office. 

Inspect all risks, making a report on inspection slips, excepting for 
special hazards and where lines of over $5,000 are carried, in which case 
use our surveys. 



FIRE UNDERWRITERS' ASSOCIATION. 27 

Instruct agents about leading points in the inspection of risks, and 
show an example of inspection by looking thoroughly through the 
basements of mercantile risks. Examine carefully the lights, especially 
in the basement. See that the stock is not piled near the lights, and 
look for the accumulation of rubbish, oiled rags, ashes or anything that 
is inflammable or liable to cause ignition. Inspect surrounding hazards 
and report thereon briefly. 

All adjustments are to be made in detail, and to be fully reported. 

When adjusting for other companies, give the names of the companies, 
amounts, time occupied for each, and expenses. 

Do not enter into an appraisement unless permission is granted by the 
office. 

Conform strictly to, and see that all agents conform strictly to, the 
rules and ratings of the Pacific Insurance Union. 

When leaving the agency enter the date of your visit in the register 
next after the last entry, signing your name thereto. 

When in doubt as to any action refer immediately to the office, using 
the wire when important matters seem to require it. 

Use diligence to have agents collect, and remit all money collected 
immediately to the office. 

Advance the interests of the company in every legitimate way, and 
secure desirable business and desirable connections whenever possible. 

Remember that your success depends on your own conduct, and the 
judgment and care displayed in the agency field you work in. 

So far as possible advise the office of the amount of net premiums of 
all companies represented by our agents. Notify agents that we expect 
a first-class representation and business, at least equal, in quantity and 
quality, to that given to any other company in the agency. 

Do not promise agents to allow the payment by us of office rent, license, 
advertising, sign painting, buggy hire or any other items, excepting 
commission, postage and exchange. Be very careful and make no 
promises to agents that cannot be kept. 

Do not authorize the publication of any advertisements of the com- 
pany or agency, unless authorized by the office. 

Write separate letters about each town visited and each loss adjusted. 
Aim to be clear and comprehensive, and avoid rhetorical flights. Do 
not scatter requests for supplies through your letters. Order supplies 
by requisition blanks only. 

If you fail to hear from the office for several days, don't be depressed. 

Don't write complaining of homesickness, and add: "Why haven't 
I heard from you ? Did you send the supplies I ordered ? " 



28 SIXTEENTH ANNUM, MEETING OF THE 

It will not be necessary to write from Marysville in July: "It's a 
hundred and twelve in the shade and a north wind blowing ;" nor from 
Helena, in December : " Thirty below zero and freezing hard." These 
reports are interesting, but may be had from the signal service. The 
discomforts of travel should be borne silently. Learn to suffer and be 
strong. 

Don't try to build up your company by pulling another down. 

Don't criticise the adjustments of others. 

Try and avoid saying : ' ' We would be glad to write that at a much 
lower figure than the compact rate. We can't change it now, but will 
ask a reduction." 

When tempted to remind the home office : "If we had kept out of 
Fresno and Hanford, and had gone in at Virginia City, we would have 
done better," don't put it in writing. You may think volumes if you 
choose. 

Give your general agent credit for ordinary intelligence, and don't be 
too fluent with advice. 

Don't run into the city Saturday afternoon and out again Monday 
morning, unless requested by the office. 

It is easier to spend the company's money than your own. If the 
expense account worries you, it's a bad sign. Sometimes specials drop 
from the ranks from " causes unknown." Don't let the account become 
too elastic. 

The new special will please remember that insurance men are sup- 
posed to be gentlemen; and he will, therefore, not indulge in such 
plebeian weaknesses as gambling and drunkenness. 

Although hundreds of miles distant from the general office, and 
apparently free from inspection or criticism, nothing is more certain 
than that any little indiscretions while on the road will in some way be 
heard of at headquarters. It will be more satisfactory to all concerned if 
our special will begin his career by acting solely and continuously from 
a high sense of duty. Guided by this principle, he will not ramble leis- 
urely through the country, carefully selecting the towns having the 
best hotels, putting in an hour or two of work every day and idling the 
balance of the time; but he will be a man of untiring action, of method, 
of patient, plodding industry. If he be not blessed with the gift of 
an acute mind and a brilliant intellect, no matter. If he be studious, 
faithful and correct in his business and personal habits, he shall sit 
before kings. 

Under the inspiring touch of his patient hand, nourished by his kindly, 
genial nature, that will bring into bud and flower the most dormant 
agent that ever wrestled with the intricacies of the rate book, agencies 



FIRE UNDERWRITERS' ASSOCIATION. 21) 

will blossom and bring forth such good fruit that general agents will 
rise up and call him blessed, and local agents will look anxiously for his 
coming, and will gather for him their largest stock of knotty conun- 
drums, accepting his answers as infallible, — as they should be. 

Such a special agent will not only be entirely competent to steer his craft 
through the dimpled waters of rate book four without springing a 
leak, but will, when in the city, haunt the compact manager, in season 
and out of season, in such an unassuming and persuasive way that he 
will, like the Ancient Mariner, hold him with his "glittering eye" and 
wrest from him decisions on points of practice that will aid him very 
materially. 

A special agent of this kind, when asked by an anxious appointee, 
"Why are drug and millinery stocks marked with a star? " will not turn 
faint and sick at heart and confusedly answer: "Why — er — because 
they're star hazards, you know," but will so clearly expound the whole 
theory and practice of the star-hazard problem that, from that time forth, 
the agent will fairly revel in those bestarred stocks. 

The constitution of the Pacific Insurance Union, with all its by-laws, 
amendations and additions, will have received his careful study. If any 
man can clearly understand it he can. 

He is also posted on : Basis rates on dwelling-houses in certain counties 
in California, in Montana, Boise City and elsewhere ; classification of 
ironclad buildings ; concentrators and chlorinating works ; crops with 
two-thirds' clause ; electric-light poles, wires, lamps and apparatus ; fire- 
works ; flumes and trestles for irrigation ; fruit-packing and drying 
houses, with or without artificial heat ; goods stored in dwellings ; har- 
vesting machinery, and transfers from out of field; hops ; long-term risks; 
manufacturing risks ; musical instruments, billiard tables, agricultural 
implements and carpenters' tools under open policies ; the meaning of 
"detached;" transfers from building to consents and contents to building. 

He does not say : "I don't know anything about rating ; that's what 
the compact is for ;" neither does he smile in a superior sort of way and 
remark : "I never solicit business ; that's what the agent is for." 

When times are good a blue streak of business comes to the office by 
every mail from the agencies he visits. When times are bad he never gets 
discouraged, but plods along in his steady, laborious way. He doesn't 
claim to be anything more than a plain, honest workingman ; but O, how 
pleasantly his sterling qualities react on the locals and the general agent! 

His tastes are simple ; his record clear ; his expense account moderate ; 
his reports complete and models of accuracy. He does not boast of what 
he has done, nor of what he is going to do. He doesn't make flying 
jumps from Gilroy to Monterey in order to pass Sunday at the Del 
Monte ; nor does he go from Santa Ana to San Diego merely to see if the 
Hotel del Coronado equals its advertisement. 



30 SIXTEENTH ANNUAL MEETING OF THE 

He is a member of the Fire Underwriters' Association of the Pacific, 
and when in town never misses a meeting. 

In closing, let me remind special agents that most of the future insur- 
ance presidents and managers will be chosen from their number. 

EDWARD NILES. 

(Applause.) 

Mr. Carpenter — Mr. President: I would like to speak 
the sentiment, I believe, of the entire meeting, when I 
say that this is one of the best papers which has ever 
been read before the Association, and it is quite as valu- 
able for what it tells a special not to do, as for what it 
tells him to do. I fully realize the fact that specials are 
not posted as much as they ought to be. With reference 
to new specials, I might perhaps relate a little of my own 
experience in that connection. When I first came to 
California, Tom C. Grant wanted somebody in a hurry. 
He did not care very much who he was, so of course I 
went to work for him. I had lived in Montana, and had 
never even seen a rate book before. It was just when 
the North British had been turned over to him; and I 
took the rate book and looked at it for a few minutes, and 
I said : " Perhaps I had better get some instructions with 
reference to this rate book. I don't believe I thoroughly 
understand it." Tom said in his off-hand way : "Any 
man that can't understand that rate book must be a 
confounded fool " (laughter); and that is all the instruc- 
tion he gave me. 

Mr. Faymonville — Mr. Chairman: I noticed that Mr. 
Niles in his paper suggests in selecting special agents 
not to appoint doctors or lawyers. According to my ex- 
perience I would suggest that they also put on the list 
the country editor. 

The President — I must confess that it was with consid- 
erable misgiving we accepted Mr. Niles' title, Special 



FIRE UNDERWRITERS' ASSOCIATION. 31 

Agents, because I did not think it was possible for any 
member of this association to tell us anything new about 
the special agent, the subject has been written upon so 
freely and dealt with so elaborately, but I am agreeably 
disappointed. Mr. Niles has certainly given us some val- 
uable hints and conclusions. 

Mr. Sexton — I was going to second Mr. Carpenter's 
motion, and I was going to state further that I think I 
did better than he did : I added for every exposure 
within one hundred feet. 

The President — We have next on the list The Special 
and the Compact, by Mr. A. A. Andre. 

THE SPECIAL AND THE COMPACT. 

Mr. President and Gentlemen: When friend Lowden insisted 
that I must write something for our annual meeting, I must confess I 
was in a dilemma. Some wiseacre, I forget who, has said, "There is 
nothing new under the sun." I guess he was about right, for I found 
that everything I wanted to say had been said before ; so don't blame 
me or accuse me of plagiarism, but consider my youth and remember 
that if I had been born sooner I might have got ahead of the other 
fellow. 

In looking for a subject it struck me that something might be said in 
regard to specials and their relations to the Pacific Insurance Union. 
For the benefit of any young man beginning the life of a special (if any 
such should happen to hear this paper read), I would state that when 
I started on the road my idea was that unless I was rapidly covering a 
deal of ground I was not doing my duty to my employers. I had not 
made many trips, however, before I began to realize that I had let 
an opportunity slip here and another there, which could not be 
recalled ; if I had stayed a little longer with this or that agent I should 
have obtained better results. It began to dawn on me that it had cost 
my company considerable money to land me in a town, and that it was 
unwise to leave before I had given the agent all the assistance in my 
power. I found by going with him to see the prospective client, and 
helping him to advance the company's claims for consideration, both 
he and I were benefited ; we became more familiar with each other's 
ideas of business, and the arguments used by each to accomplish his 
purpose were exchanged ; besides, we became better acquainted 
socially, — a very important item to the special. 



32 SIXTEENTH ANNUAL MEETING OF THE 

How often do we hear an agent say, "I shall always keep such and 
such a company in the front rank in my agency, because their special, 
Mr. So and So, took such pains to teach me the business and helped me 
so much in the start. " A little more time spent on each agent mav 
make a trip a little longer, but I think you will admit that the results 
will justify the loss of time. 

Next to honesty and truthfulness I think there is nothing so necessary 
to success in life as discipline, and in our profession this is particularlv 
the case. The old nautical saying, " Obey orders if you break owners," 
certainly holds good ashore. The special, to be appreciated, must carry 
out the instructions received. If the judgment of the employer is at 
fault, the blame, if any, should attach to the commanding officer, not 
to the subordinate who obeyed orders. 

He who is never at a loss for a logical argument to combat an erroneous 
idea is fortunate indeed, for he will find lots of opportunities to use it. 
Many false impressions regarding the Pacific Insurance Union exist 
all over the Coast, and with a number of agents the idea that insur- 
ance companies are run for N the agent's especial benefit seems to have 
taken root. The special should take pains to explain to such that, 
while the managers are ever ready to do anything they consistently can 
for their agents, they must also look after the interests of the stock- 
holders: that, while they can't control the company's loss ratio, it is 
their duty to make some effort to keep the expense of the business 
within reasonable bounds. It is wise to remind them that before the 
Pacific Insurance Union was formed there were three classes of com- 
panies, — the San Francisco Board of Underwriters or old Board, the 
California Board, and the Free Lances, each rustling for business ac- 
cording to its own rules. Rates were then in a large measure anything 
that could be obtained; and a reckless scramble for business was the 
order of the day w T ith some companies. If a man had a risk to place 
he went to the different agents in his town and auctioned the one 
against the other, occasionally throwing out a hint that he had friends 
in San Francisco, who did a large business with insurance companies, 
who would be able to get his risk written for next to nothing. The 
result was he sometimes got his insurance for one per cent when 
the hazard was fully worth two per cent or two and one-half per 
cent. The company carried too much risk for the compensation 
received, and the agent's income was naturally less, as he had less pre- 
miums to collect. It was a self-evident fact that things could not 
continue this way, so the P. I. U. was formed, and at once went to work 
to formulate rates for all alike; and it is a curious fact that the prime 
movers came from among the Free Lances. That rates are fair and just 
is shown by the fact that all seem pretty well satisfied with them to-day, 
and indeed should be; for the companies are not making as much money 



FIRE UNDERWRITERS' ASSOCIATION. 33 

from their premium income as is made in almost any other line of busi- 
ness, considering the vast amount invested. The only real "kick" is 
on the question of commission to agents ; and in this regard the Pacific 
Insurance Union, having done so much to simplify the work of the 
special, I think the least he can do in return is to constitute himself its 
champion whenever occasion requires. In fact it is his duty and his 
interest so to do; and he should show avaricious agents that, unless they 
are willing to work for a reasonable compensation, the rates they are so 
pleased with cannot be maintained. Show them, as I said before, that 
stockholders have an interest in the business, as have general agents 
working on commission, as well as managers on a salary, and last, but 
not least, the special himself is also interested. Show the agent that, 
while he has not a cent invested, and does not even pay his postage 
and exchange, yet he is making, at fifteen per cent commission, a larger 
profit on the business he does than most merchants in his town who 
have thousands of dollars invested in their business. 

It is pretty generally talked and believed by field men that the P. I. U. 
rules are being violated by several companies, mostly in the matter of 
commission paid. Now, gentlemen, if the agent actually kept the extra 
commission, it would not be so bad ; but as a matter of fact he does not 
but uses it to rebate with ; thus his company is selling its goods for less 
than its neighbors, and is thereby losing its legitimate profit. It would 
be strange if a machine which includes so much as the P. I. U. did not at 
times disappoint the promoters, but the small failures emphasize the fact 
of the great good accomplished ; and it is childish to sit down and howl 
over a petty disappointment. Let us stand up like men and lend our 
assistance to keep the compact going. One thing it seems to me might 
be done with advantage to all, and that is to let the matter of specially 
rating a town or a building be thoroughly understood by the specials; 
Would it not be well to let each one have the formula used by the com- 
pact for rating purposes, so that, when he is introduced to the assured 
and asked what his rate would be if he made this or that improvement in 
his building, the special could give him a satisfactory answer on the 
spot, instead of telling him to send in his risk and the office will do the 
best it can for him? It seems to me it would prevent one evil often 
complained of, by letting the special speak with authority, rather than 
shouldering it all on the compact. 

A special agent is a "dead-give-away " on the office he is with, and his 
fellow specials can tell very quickly who is living up to the rules and who 
is breaking them. If the manager of the union wants proof of the dis- 
loyalty of an office, let him look for it among the field men. "Like 
master like man " is an old saying, and yet I have known men who fol- 
lowed instructions and differed radically with the ideas of the general 
manager who employed them. The recent annoyance caused in the 



34 SIXTEENTH ANNUAL MEETING OF THE 

southern part of the State by the mutual companies is a fair warning to 
all what would be the result of a stampede ; therefore let every one of us 
strike hands on the proposition to uphold and stand by the P. I. U. 

A. A. ANDRE. 

(Applause.) 

After the reading of the paper it was suggested that 
the schedule ratings used by the surveyors of the Pacific 
Insurance Union should be placed in the hands of all 
special agents. Mr. Conroy, Assistant Manager of the 
Pacific Insurance Union, who was present, stated that 
these schedules had been published by the Union, and 
would be supplied to any special agent who desired 
them. 

Mr. Carpenter then introduced Mr. B. M. Spencer, 
Special Agent of the Royal Insurance Company. 

The President — Before we adjourn, as we have a short 
paper by Mr. C. A. Laton, on Fire Patrols, perhaps it 
would be well to have this read. We can then begin the 
afternoon session with Mr. Folger's paper on the Growth 
of Tariff Associations. Will Mr. Watt kindly read Mr. 
Laton's contribution ? 

Mr. Watt — I have only had time to read this over once, 
but it is typewritten, and I may be able to read it as it 
was intended to be read. 

FIRE PATROLS; SALVAGE CORPS; PROTECTIVE DEPART- 
MENTS ; THE UNDERWRITERS' FIRE PATROL 
OF SAN FRANCISCO. 

Much has been written and a great deal more said concerning organ- 
izations of this kind,, and whether the}' so answer the purposes of 
organization as to leave little or no room for unfavorable criticism on 
the part of all persons interested in the service performed. Apparently 
the wisdom of organizing and continuing these enterprises has been 
put to a pretty severe test in the United States, there being at the 
present time in operation in the various cities and towns, to wit : 

Full-fledged fire patrols, etc., viz : 



FIRE UNDERWRITERS' ASSOCIATION. 35 

New York Fire Patrol .... organized about 23 years, having 4 stations 

Boston Protective Department " " 17 " " 2 " 

Albany Protective Committee " " 17 ■' " 1 " 

Philadelqhia Fire Ins. Patrol " " 21 " " 2 

Baltimore Salvage Corps . .. " k ' 17 ll M 1 " 

Worcester Protective Dept. . " ,l 16 " " 1 " 

Underwriters, Newark, N. J., Protec. Assn. 12 ' k " 1 " 

Chicago Fire Insurance Patrol 19 u " 3 

St. Louis Underwriters Salvage Corps ... 16 " " 2 

Louisville Salvage Corps ? l ' " 1 

Milwaukee Fire Insurance Patrol ? " " 1 

Underwriters Fire Patrol of San Francisco 16 " " 2 

Also the following named comparatively incomplete but more or less 
effective organizations of recent date, viz : 

Lowell, Mass., Fire Patrol. 
Montgomery, Ala., Salvage Corps. 
Janesville, Wis., Fire Patrol. 

Besides these there are doubtless many other more or less efficient corps 
in several places in the United States and Canada in reference to which it 
has been quite inconvenient to obtain definite information. The same 
thing is doubtless true concerning many cities in Europe and elsewhere. 

It is hardly reasonable to presume, even, that these enterprises would 
have been so numerously created, and continued for such long periods 
of time, if they had not done excellent work and satisfied the pro- 
jectors. Had the opposite been the case, fire patrols in the United 
States would have ceased long ago ; consequently it is confidently 
believed that these organizations have been wisely conceived. It is 
quite generally understood that fire underwriters contribute the money 
necessary to equip and continue the patrol or salvage service, in nearly 
every city above named, howbeit there is no distinction made between 
property owners who are insured, and those who are not insured, in the 
carrying out of the service. It has been claimed that any other course 
than this is opposed to that which is right and proper, in view of the fact 
that the patrols or salvage corps must necessarily and do have the same 
right of way on the public streets, etc. , as is accorded to the fire depart- 
ments. Moreover, discrimination between insured and uninsured would 
be apt to lead to such sentiment on the part of property owners as 
would create a feeling of antipathy, and one way and another prevent 
the patrol from saving property, and thus spoil or destroy the efficiency 
of the service. Nearly every one of the patrols or salvage corps are 
expected to use all possible endeavors to save life also. This is, and 
should be, a most important feature, and one well calculated to leave 
a very favorable impression upon the public mind. A trulv wonderful 



36 SIXTEENTH ANNUAL MEETING OF THE 

record, as to property and life saving, has been made by the patrols in this 
country since they were first organized. But the main purpose in view is 
the protecting and saving of property which would otherwise be partially 
or wholly lost, by reason of the efforts which are put forth by fire depart- 
ments in extinguishing fires. In the larger cities (and it is in the larger 
cities only where really good results can be secured), where immense 
values in merchandise and other personal property are located, the 
savings or salvages by patrols have been very large indeed, and have 
justified the expenditure of the necessary amount of money. As far 
as known, all of these services have been conducted with strictest 
economy, and generally wisely. In order that the very highest meas- 
ure of success may be attained in operating a fire patrol or salvage 
corps, it is of first importance that the fire department and the patrol 
shall be on the best of terms. In short, if otherwise is the case, the 
fire patrol may as well be disbanded, or temporarily set aside, until the 
right sort of feeling is established. It is also confidently believed that 
these enterprises do answer the purposes for w T hich they have been put 
in operation. It may not be out of place, however, to state that there 
is a very wide divergence of opinion in many minds (fire underwriters 
and others) as to whether fire patrols should be organized and supported 
by fire underwriters only, or by the municipality. The consensus of 
opinion is that the service is not likely to be better done than in New 
York, Albany, Boston, Philadelphia, Baltimore, Chicago and St. Louis, 
in all of which localities the fire underwriters have organized, controlled 
and supported the several patrols. 

The Underwriters Fire Patrol of San Francisco was organized in the 
year 1875, and has been a pronounced success from the beginning. It 
is managed by a Board of Directors, seven in number, who are elected 
annually by the principal representatives of insurance companies, from 
their own members. Without interruption of any kind, the most cordial 
and hand-to-hand helpfulness has existed between the San Francisco 
Fire Department and the Underwriters Fire Patrol of San Francisco, 
rank and file alike. Captain Russell White, of Boston, Mass. , was placed 
in charge when the patrol was organized, and has proven a most painstak- 
ing and efficient superintendent. Under his care, the plant or apparatus, 
men and animals have been kept in strictly first-class condition, and so 
acknowledged by all persons who have taken the time to investigate. 

San Francisco people have always been ready to sound praises of the 
fire department ; and they are w T ell deserved, especially so when it is 
considered that the department is not upon a full paid basis (as is the 
case in New York, Boston, Philadelphia, Chicago and many other large 
cities in the Bast), but is operating under many disadvantages, with 
very skillful officers in charge. The Underwriters Fire Patrol of San 
Francisco is justly entitled to much praise also, and there are very few 



FIRE UNDERWRITERS' ASSOCIATION. 37 

citizens and property owners in San Francisco who do not know all 
about the patrol, and appreciate its value to them also. They will act 
wisely, however, if they do not allow themselves to be deluded into the 
false notion of absolute security, by reason of the existence of these 
appliances for extinguishing fires and saving property and life, since both 
of these organizations were in existence (under like conditions to those 
which exist in San Francisco now) in the cities of Chicago and Boston, 
when those cities were devastated by fire in the years 187 1 and 1872, 
respectively. 

In conclusion, a quotation from The Independent of New York will not 
be out of place, having special reference to that portion of an excellent 
article bearing upon patrol or salvage service, to wit : 

"Mr. H. W. Eaton, resident manager of the Liverpool & London & 
Globe, contributed an article on the duty of municipalities in the pro- 
tection of property at fires, — 'at' fires, not from fires, be it noted in 
passing. Considered by itself as an investment, Mr. Baton admits that 
the maintenance of salvage corps by the companies pays. The admission 
is inevitable ; for, if the companies maintained a patrol service which did 
not pay, they would be simpletons, which they do not confess themselves 
to be, or else philanthropists, which they do not profess to be. This, 
however, is our own comment, not Mr. Eaton's. He adds that neverthe- 
less it cannot be certain that the companies have thus saved money, until 
it can be shown that the patrol system has operated neither to depress 
rates nor reduce the amount of insurance carried ; that the money value 
of a patrol service cannot be judged solely by comparing its cost with 
the actual saving affected by it upon stocks exposed to fire. Still he 
would not abandon salvage organizations in any event ; for even if their 
present services were undertaken by the public authority those organiza- 
tions could be utilized in other work, for instance, in the handling and 
sale of merchandise saved. The question whether the city could be 
trusted to do the salvage work as faithfully as the companies' employes 

now do it he declines to answer." 

CHAS. A. LATON. 

(Applause.) 

Mr. Maxwell— Mr. Chairman: Before adjourning I 
would like to state that there is a gentleman here who, 
while he is an old member, has never attended our 
annual gathering before ; and I take pleasure in pre- 
senting to you Mr. Spencer, Secretary of the Home 
Fire Insurance Company of Seattle. 
f. u. A. 3. 



38 SIXTEENTH ANNUAL MEETING OF THE 

The President — Gentlemen : I take pleasure in intro- 
ducing one of our absentee members. Mr. Spencer, we 
are glad to see you. 

A resolution was adopted this morning authorizing 
the appointment of a committee to consider the recom- 
mendations contained in the President's address, and to 
report before the close of this annual meeting. I will 
appoint as such committee Messrs. Herbert Folger, H. 
M. Grant and L. B. Edwards. 

Mr. Watt — I move that we adjourn, Mr. President, 
until two o'clock. Seconded and carried. 



Afternoon Session. 

The President — Well, gentlemen, we have given the 
stragglers fifteen minutes' grace ; that is about as much 
as we ought to allow them. I think we had better pro- 
ceed with the business of the afternoon. We have 
quite a number of good papers on the programme, and 
some time should be allowed for discussion. 

I am in receipt of a telegram from our old friend 
D. M. Bokee, w 7 hich is dated at Seattle. He drops into 
poetry : 

Too far away, cannot attend ; instead thereof my greetings send. 

D. M. BOKEE. 

The first paper for the afternoon is the Growth of 
Tariff Associations, by Mr. Herbert Folger. 

Mr. H. M. Grant — Mr. President : Before the reading 
I would like to introduce to the assembly Mr. E. L. 
Thompson, one of my special agents, whom we have just 
elected to membership to-day. He comes to make his 
initiatory bow. 



FIRE UNDERWRITERS' ASSOCIATION. 39 

The President — I take pleasure in introducing Mr. 
Thompson to the association. Mr. Thompson, we are 
glad to welcome you. 

We will now proceed with the reading of Mr. Folger's 
paper. 

THE GROWTH OF TARIFF ASSOCIATIONS. 

"The world does not require so much to be informed as to be 
reminded." 

It has been remarked by a leading insurance journalist that "various 
attempts, more or less successful, on the part of State legislatures to 
prohibit the formation of tariff associations, have set a great many under- 
writers seriously thinking whether, on the whole, such associations have 
been beneficial to themselves or their business." 1 To determine this it 
is needful to review their history. The evolution from societies of local 
managing officers to the elaborate compact office of to-day has been 
accomplished in this country in seventy years. In 1819 the then eight 
insurance companies 2 of New York City formed the Salamander Society. 3 
Until 1 8 10 they had made money upon rates probably prescribed by the 
Royal Exchange Assurance; but as competition increased rate-cutting 
was introduced, resulting from the ignorance or inexperience of new 
officers. The metropolis of the country, New York, had a population of 
120,000, but with the exception of Baltimore, Philadelphia and Boston 
no other cities were as large as the present Oakland, California. Eight 
or nine States had been added to the original thirteen, extending west 
to the Mississippi River; the Louisiana Purchase had annexed an enor- 
mous tract, roughly described as an irregular triangle, with the present 
New Orleans, St. Paul and Portland, Oregon, near its points; Florida 
was Spanish territory; and south of the Louisiana Purchase was New 
Spain. The population of the Union numbered less than ten millions 
in 1820, exclusive of the Indian tribes. "The stage coach, canal packet, 
private conveyance and frequently corduroy roads, were the means of 
travel beyond the principal rivers." 4 

The Salamander Society, considering the times, was a model. City 
buildings were rated by classes, with additions for occupancies. Out- 
side risks were under an advisory tariff, say fifty cents for farm dwell- 
ings, seventy -five for sawmills, $1.50 for oil and woolen mills, etc. The 

1. Weekly Underwriter, 1889, Vol. XL, p. 340. 

2. Globe, Eagle, Mutual (Knickerbocker), Franklin, Fulton, Washington, Merchants and 
Mechanics Insurance Companies. 

^ 3. " Early Records of Fire Underwriting," by Henry A. Oakley, Insurance Times, 1869- 
70. The five articles include copies of policies, complete tariffs, etc. 
4. J. B. Bennett, 1876, address F. U. A. N. W., pp. 34-59. 



40 SIXTEENTH ANNUAL MEETING OF THE 

rules required specific insurance on mill buildings and contents, pre- 
scribed additional charges for builders' risks, and modified the English 
custom of granting seven years' insurance for six years' premium, to 
conform to the interest rate of seven per cent. A uniform policy was 
adopted in 1821. Seven years after its formation the society reorganized 
with twenty-four members, announcing its purpose as the adoption of 
"uniform rates of premium for insurance in the city and county of New 
York and the village of Brooklyn." Though many of the intermediate 
records are missing, the New York Board of Fire Insurance Companies 
has existed with few breaks ever since. The Salamander Society could 
not have been a "grinding monopoly," as dividends in New York from 
1819 to 1830 averaged only four and one-half to eight per cent per 
annum. 5 

THE EARLY CONVENTIONS. 

From 1826 another twenty years brings us to the first National In- 
surance Convention. Intervening was the formative period. So little 
had the New York and Boston companies devoted themselves to agency 
business, that it became a question whether the bulk of the 'Western risks 
should fall to the Philadelphia, Nashville or Hartford companies. The 
wealthy Philadelphia corporations were first in the field, but were 
fettered by conservative management, and restricted their operations 
after the conflagrations of pioneer times. The Nashville companies 
combined insurance with banking, and ultimately abandoned the former 
for " pursuits offering them better profits and steadier margins." The 
Hartford offices were fortunately represented at home and abroad, 
and the Cincinnati branch of the Protection Insurance Company 
wrote three millions in premiums with a net profit of ten per cent for 
the twenty years. This office, and that of the JEtna, which succeeded 
to its prestige, furnished some of the brightest men in the profession in 
later years. The chief event of the period was the New York conflagration 
of December 16, 1835, the largest then known in the United States. The 
commercial and financial position of the metropolis made the loss, esti- 
mated at seventeen millions, a national calamity. North and South 
petitioned Conress to relieve the city; and Daniel Webster supported 
the request that the national surplus be deposited for a time in New 
York banks to relieve the stringency, 6 which was denied without debate. 
During forty years, capitalists had felt no fear as to the security of fire 
insurance corporations, and the courts had habitually directed the 
investments of trust funds in their stocks ; but the insolvency of all but 
three of the local companies, and the long delay in settlements, had 
their natural effect." 

5. McCulloch's "Dictionary of Commerce." 

6. Congressional Globe, 1836 (Appendix, p. 21, etc.) 

7. N. Y. Comptroller's Report, 1854, Barnes' edition, Vol. I, p. 880. 



FIRE UNDERWRITERS' ASSOCIATION. 41 

This was only the beginning of the epoch often referred to as furnish- 
ing " a conflagration on the average every four years, each sufficiently 
extensive to cripple the local companies interested." The New York 
Board was so crushed by the calamity that the business became demoral- 
ized and was indeed "at sea, without chart, compass or pilot, left to the 
beauties of free competition." 3 The decline in rates was more marked 
than ever before or since, the iEtna of New York reducing its average 
fifty per cent in nine years, and the New York Bowery reporting an 
average rate of forty-two cents in 1845. 9 

The National Insurance Convention of May 12, 1846, followed soon after 
the second New York conflagration, 10 which destroyed property to the 
value of six millions, and was probably called by the reorganized local 
board. An insurance convention fifty years ago had but little to work 
with. There were neither insurance departments nor annual statements, 
and the delegates had no figures of the business of particular sections or 
the assets of the companies ; nearly all tariffs were home made ; the first 
insurance map was not published until four years later; the first steam fire- 
engine was introduced in Cincinnati in 1853, against strenuous opposition 
from volunteer firemen ; reinsurance 'reserve was an unknown term, and 
the companies advertised as surplus the excess of assets over capital 
and unpaid losses, without regard to the amount at risk ; commission to 
agents was a new item of expense, five to ten per cent being allowed at 
outside points, while city risks were secured direct without brokerage, as 
the demand for insurance probably exceeded the supply ; and legislation 
had not extended to insurance details. The record of proceedings is a 
meager one. Three resolutions expressed the sense of the convention 
that the severe losses of the preceding twelve years required and justified 
an advance in rates ; for the committees reported that the business for 
twenty years had produced less than three per cent per annum upon the 
capital invested. 11 The direct results of the convention are uncertain, 
though New York companies secured an advance of ten per cent on city 
business. But the agency companies were only at the beginning of their 
troubles Pittsburgh, Brooklyn and Albany 12 only prepared the way for 

8. Edward A. Stansbury's address to stockholders, Insurance Monitor, 1858, p. 100. 

9. These rates are based on amounts at risk, as amounts written were not reported to the 
comptroller. 

10. July, 1845. 

11. "It has been ascertained from the statistics of fire insurance in the United States for 
the last twenty years that the business has not produced a profit equal to three per cent per 
annum upon the capital pledged for the payment of the losses, that many of the companies 
have been entirely ruined, that losses by fire are yearly becoming more frequent and more 
extensive upon all classes of hazards, that the rates of premium in some places remain as 
formerly but in other places have been much reduced, that the increase of losses has not 
been confined to a few places but has been widely extended, and that the whole amount 
of losses that have happened in villages and upon manufactories and other isolated risks 
have, within the last few years, been as great in proportion to the sum insured as in 
the cities." 

12. The Pittsburgh losses were estimated at $1,500,000, of which only $800,000 was insured. 
Of this Pittsburgh locals incurred $700,000, and Philadelphia companies $100,000, as under 



42 



SIXTEENTH ANNUM, MEETING OF THE 



the St. Louis fire of May 17, 1849, which consumed fifteen blocks and 
twenty-three steamboats, aggregating five million dollars. As the 
insurance losses are reported 13 it may be interesting to compare them with 
the losses in Spokane Falls forty years later. 





St. Louis, 1849. 


Spokane, 1889. 




No. 


Losses. 


No. Losses. 


Local companies .... 
Other State companies . . 
Foreign companies . . . 


7 

15 
None 


! 
$ 968,000 CO 

1,129,673 OO 


58 
34 


None 
$1,174,418 00 
832,607 00 




22 


$2,097,673 OO 


92 52,017,025 00 



In St. Louis less than half the local losses were met, and payments 
were largely made in stock of no value for three years afterward. The 
conditions have so changed in forty years that, while other State 
corporations furnish about the same idemnity in each of the frontier 
towns, the local losses of 1849 were replaced in 1889 by nearly the same 
amount paid by the English, German, Swedish, Swiss and Colonial com- 
panies. Moreover, the largest losses in St. Louis were $295,000 and 
$260,000 incurred by the Franklin of Philadelphia and Citizens of St. 
Louis respectively ; while in Spokane the Commercial Union and Hart- 
ford headed the list with only $75,700 and $67,471. 

This disaster led to the second National Insurance Convention, held in 
the fall of 1849, H made up of delegates from eight agency companies.' 5 A 
minimum tariff was prepared for the guidance of agents, who were directed 
to form local boards for revision of rates, but were not allowed to write 
below the tariff under any circumstances. Agents were instructed to 
exchange expiration lists monthly, with the new rate marked against 
each risk. The convention provided for printing local tariffs in cities, 
authorized the appointment of a general agent, and named as excepted 
cities 16 practically all the towns w T here local companies existed. The 



the Pennsylvania law excluding other State corporations Pittsburgh property owners 
were compelled to rely upon their own companies, whose lcsses were settled at from fifty to 
ninety cents on the dollar. The Albany fire occurred August 17, 1848, cost the Firemen's 
Insurance Co. $90,000 and changed the surplus of the Albany from $12,474 to an impairment 
of capital of $128,394. The Brooklyn fire of September 9, 1848, involved the Loug Island 
to the extent of $60,000, and exhausted the surplus and $98,000 of the capital of the Brooklyn. 

13. Insurance Monitor, 1872, p. 60. 

14. Insurance Monitor, December, 1853. 

15. iEtna, Protection, Hartford, Northwestern of Oswego, Albany, Columbus of Ohio, 
Lexington of Kentucky and Long Island of Brooklyn. 

16. Cincinnati, Louisville, Albany, N. Y., Brooklyn, Troy, Boston. Providence, Norwich, 
New London, New Haven, Hartford, Middletown, Worcester. Springfield and New Bedford. 
Philadelphia was omitted owing to the Pennsylvania exclusion law of 1829; and the 



FIRK UNDERWRITERS' ASSOCIATION. 43 

tables of combined experience used by the convention were not pre- 
served; but the experience of the Protection from 1826 to 1853 17 gives 
some indication of their character. Water-power sawmills, insured at an 
average of $1.72 per annum, showed a combined loss and expense ratio of 
$5.60; small factories written at $1.75 had cost $10.22, and so on. The 
convention made an honest effort to correct the evils of inadequate 
ratings, but like later conventions of similar character it refused informa- 
tion to the public in support of marked increases. With reference to the 
convention of 1849 it was remarked six years later that " the public gen- 
erally demurred to paying the increase, and so great was the discontent, 
especially in the State of New York, that out of it grew the multitude of 
sham compmies authorized by the general insurance law of 1849, the 
fruits of which are not yet fully reaped." 13 The premiums of the Albany 
Insurance Company exhibited an advance in the average rate of 1849 °f 
twelve and one-half per cent over 1848 and thirty-five and one-half per 
cent over 1846, the latter combining the effect of the two conventions. 

The third national convention was held in May, 1850 ; 19 but there is left 
to us only a synopsis of the committee's report reviewing the business of 
the first half of the century, and proving that on the whole no net 
profit had been made so far from the underwriting account. The fourth 
and greatest of the insurance conventions was held in New York in 1866. 
The history of tariff associations properly begins with this convention ; 
but it is necessary to consider for a few moments the changes which took 
place between 1849 arj d 1866. 

STATE SUPERVISION. 

The most important of these was the placing of insurance under State 
supervision. In New York and Massachusetts some of the local com- 
panies had filed balance sheets with the comptrollers for many years, 
very erratic in character; but, after the execution of the law of 1849 na( ^ 
developed the weakness of some institutions, the New York State offi- 
cers drew the attention of the legislature to various defects, 20 and their 
recommendations were embodied in the law of 1853. In l ^ Massachu- 
setts established a separate insurance department; New York followed 
the example in 1859 upon the petition of underwriters; and other States 
gradually adopted similar methods. Companies were forced to pay up 
their capitals, and reinsurance reserve (so-called) was invented. Com- 
panies were at first permitted to estimate this, but after noticing varia- 
tions from seventeen to fifty-three per cent of annual premiums, the 

Southern cities were probably riot included under the tariff, following the precedent 
established by the Salamander Society thirty years earlier, whose tariff reads, "Southern 
and Western risks excepted." 

17. Insurance Monitor, 1856, p. 17. 

18. " Aristides" in Insurance Monitor, 1855, p. 74. 

19. Insurance Monitor, 1872, p. 463. 

20. N. Y. Comptroller's Reports, Barnes' edition, Vol. I, pp. 757 and 857. 



44 SIXTEENTH ANNUAL MEETING OF THE 

State officials secured the adoption of fixed reserves, first forty and later 
fifty per cent. So great was the improvement that the Troy fire of 1862, 2l 
though it involved eighty-three companies and insurance losses aggregat- 
ing $1,460,000, saw every claim paid, the first case of the kind on record. 
The value of insurance supervision has been impeached by eminent 
members of the profession 22 who have never had to conduct their business 
without it. Possibly they have never read the attacks upon insurance 
companies so freely printed by insurance journals in the early fifties, 
or the petition of fifty-four New York companies 23 about the same 
time that a committee might be appointed by State authority to ex- 
amine their condition. Newspapers then claimed to protect the public 
from weak corporations. Of what we may expect from the same tri- 
bunals, the last six months of 1891 have given ample evidence. Com- 
parison with methods followed in England and continental countries 
has often seemed to favor similar absence of restrictions in America, 
but the conditions are dissimilar. Across the ocean a few large com- 
panies have practically all the business. Rates are so low that a new 
company must write an enormous amount to pay expenses. The fields 
are small and compact ; and a weak corporation cannot go a thousand 
miles from home to mislead others. Above all, the character of trans- 
Atlantic populations is essentially different : They are slow to change 
and cling to the established order. In the United States, small com- 
panies, both home and foreign, have found no difficulty in securing busi- 
ness until recently; while in England, after repeated efforts during thirty 
years, only one American fire insurance company has secured a perma- 
nent foothold. 24 Without supervision we should have been exposed to 
possible antagonism between the companies and the press, the one pos- 
sessing the only reliable information and the other almost the sole 
medium for transmitting it to the public. Some companies which had 
served the public 25 well found themselves unable to meet the official test 
of solvency at the outset, and the refusal to license the Protection of 
Hartford startled the community; but the higher standard demanded 
thenceforth did much to elevate the business and prepare the remaining 
companies for the ordeal before them. Had the true American principle 
been carried out, by putting the companies of all the States on the same 
footing in any one, and requiring the same elements of financial strength 

21. N". Y. Insurance Report, 1862. 

22. It. A. McCurdy in N. Y. Independent, March 26, 1891, etc. 

23. Insurance Monitor, 1856, p. 33. See Barnes' condensed edition N. Y. Reports, Vol. II, 
p. 213, for the report, which recommended rigid supervision by the fctate and legal enact- 
ments requiring a fixed reinsurance reserve. 

24. Insurance Company of North America. 

25. Prior to 1850 the public depended entirely upon the advertisements of, or statements 
of, individuals connected with insurance companies, or information as to their standing. 
The first generally consisted of cards presenting the amount of capital subscribed, some- 
times the assets (the difference between capital and assets being regarded and advertised a> 
surplus), and full lists of directors. 



FIRE UNDERWRITERS' ASSOCIATION. 45 

of local institutions as were demanded of other State companies, insur- 
ance history might not have recorded the failure of one hundred com- 
panies in two years and the default of $80, 000,000 of insurance losses 
under policies written in accordance with the laws. As the first New 
York commissioner wrote : "The insurance corporations of each State 
should be allowed to compete freely with those of every other, sharing 
the same benefits and privileges, and limited and controlled by the same 
restrictions and regulations, subject only to such reasonable rules for 
their management as each State, in the exercise of its sound discretion, 
may deem expedient and necessary. The field for the beneficent opera- 
tion and future extension of old and tried systems, as well as of new 
plans of insurance development, ought not to be limited by any State 
lines in our Union ; but, discarding all narrow and provincial rivalries 
and jealousies, a vast continent should be fairly opened for honest and 
honorable competition, leaving success to reward as it should those 
companies which best subserve the public interests. The adoption of 
this policy, with equal and exact justice to all, will furnish each State, 
at the cheapest rates, with the best indemnity and protection." 26 

The early commissioners gave considerable attention to fire insurance, 
but, finding it impracticable to secure anything but general statistics 
from the companies, soon betook themselves to the study of life insur- 
ance, for which, with mortality tables, fixed rates of premium and the 
practice of restricting risks to healthful lives, they were soon able to 
establish a system of valuations satisfactory to them if not to the com- 
panies. Whether a fixed fire loss reserve, based upon the amount at 
risk, would have been better for the public and the companies, is an 
open question : it has had many advocates. State supervision may be 
dismissed with the remark by a former president of the National Board, 
"Whatever difference of opinion may exist as to its merits, we have to 
thank it for the only records of the business to which we can have 
access." 

EXTENSION OF AGENCIES. 

The second feature of importance in this period was the extension of 
the agency system over the country at large. For fifty years the com- 
panies of New York, Boston, Baltimore and Philadelphia had written 
the fire risks of their respective cities. Insurers and insured were alike 
slow to accept the principle that receipts from a wide field furnish the 
surest indemnity for every part of it. With the exception of the Pro- 
tection, which had 250 W 7 estern agents, the few agency companies con- 
tented themselves with appointing representatives at military stations 
and land-offices. The collapse of the Columbus Insurance Company in 
the Chilicothe fire, followed by the failure of the Protection, transferred 



26. N. Y. Insurance Report, 1861. 



4() SIXTEENTH ANNUAL MEETING OF THE 

the business to stronger hands, the mantles of those companies falling 
respectively to the Hartford and iEtna. The Western department of 
the latter company was placed in charge of Mr. J. B. Bennett, who built 
a business in seventeen years of as many millions of premiums, and 
earned for himself the proud but significant title of the Napoleon of fire 
underwriting. The great New York agency companies, the Home, 
Phcenix of Brooklyn, and Continental, were organized in 1853. The 
tariffs of 1849 an d I ^5o, which the companies had not presumed to raise 
to the average cost shown by their limited experience, Mr. Bennett tells 
us, ''were called in and burned." The best rates the classification 
tables or the light of daily practice and observation afforded were ascer- 
tained, and thirty-three per cent added thereto, to get on productive 
strata. Field work, begun in 1847, had much to do with the marked 
increase in agency business. But so slow were the older local companies 
to adopt the policy of spreading their risks that in i860 only eight New 
York, twenty other State, and two English, companies reported United 
States premiums exceeding one hundred thousand dollars per annum. 
Of these the iEtna, Home and Security were in the lead with over one 
million dollars each. 

During the ten years from 1855 to 1864 the United States premium 
receipts of the leading agency companies increased as follows : 

1855. 1864. 

^£tna (Hartford) $1,445,051 $2,046,626 

Continental . . - " 136,376 417,354 

Franklin (Philadelphia) 27 383,714 ^i^o 

Hartford 455,782 77 2 > Ior 

Home (N. Y.) 366,805 1,942,574 

Ins. Co. of N. America from 1854 . . 411,44! 483,764 

Metropolitan (N. Y.) 338,474 805,832 

Phcenix (Hartford) 79,870 548,5 2 7 

Phcenix (Brooklyn) 559,46o 685,390 

Security (N. Y.) from 1857 68,655 i,H9?54i 

ADVENT OF FOREIGN COMPANIES. 

The establishment of American branches by the English agency com- 
panies had an important bearing upon the after history of fire insurance 
in the United States. Before the Revolution the Royal Exchange had 
some Colonial business, but abandoned it. The Phcenix of London, 
organized in 1782, appointed agents in Philadelphia and New York at 
the opening of the century, but was banished by statutes in 1810 and 
1814, leaving the American field to American companies for nearly forty 
. . — . — « — 

27. For explanation of the decline of the Franklin, the wealthiest American Insurance 
Company at the time of the St. Louis fire of 1849, see Fowler's "History of Insurance in 
Philadelphia," p. 492. 



FIRE UNDERWRITERS' ASSOCIATION. 47 

years. The British public is conservative, and as their new offices found 
it difficult to compete in London with the Sun, Phoenix and Royal Ex- 
change, their managers ventured abroad with the hope of obtaining the 
income denied to them at home. The Liverpool & London Fire & Life 
Insurance Company, then twelve years old, opened a New York agency 
for fire business in 1848, receiving $4,519 in premiums for that year. 
The Monarch & Unity of London and Royal of Liverpool came soon 
after, but the absorption by the Liverpool & London of the business of 
the Monarch & Unity left only two English Companies in this country. 
It is interesting to notice what attracted them to America and first gave 
them a foothold. Statistics of United States business were obtainable 
after 1849 i n convention shape for submission to directors, and the rates 
of premium were more than tempting. The risks written in England in 
1855 were equivalent to $4,324,299,880, and in France $8,600,000,000 ; but 
the average rates were respectively only twenty cents and eight and one- 
third cents per one hundred dollars per annum, while the American rates 
were about $1.30. The Hartford companies, besides paying liberal divi- 
dends, added several millions to their stock capital out of surplus funds 
between 1850 and i86o. 2S A table printed in 1855 showed that several Bos- 
ton companies had returned from 258 to 773 per cent since organization, 
less than forty years before, paying as high as thirty- five per cent in good 
years. 2a In recommending his company to enter the United States in 
1857, the manager of the Thames Insurance Company remarked that 
" The Royal office was not only able to pay, however great, its losses in 
Canada and America, but it made a profit upon the American branch of 
its business of ^18,553. This must seem to the meeting," he continued, 
"a very large sum after the company had realized upon its English busi- 
ness ^6,000 only." 30 Finally the expense of securing business was not 
great. The Royal reported a general expense ratio of twenty-four per 
cent in 1852, and had no occasion to increase it on this side the Atlantic. 
The handsome dividends paid by American companies for many years in 
the face of what we regard as excessive loss ratios indicate that expenses 
were light. 

On the other hand it is interesting to consider what advantages the 
English companies possessed : 

1. Their financial strength was undoubtedly attractive. From 1835 to 
1853 no New York corporation had above $500,000 capital, and the mil- 
lions of foreign assets had a natural effect. That these funds included 
life accumulations made little difference either to the public or the com- 
panies: the former knew nothing of net valuations or reserves, or the 
necessity for them; and the English laws requiring segregation of fire 



28. Hine's "Centennial Blue Book : Hartford Historical Reviews." 

29. Insurance Monitor, 1856, p. 15. 

30. Insurance Monitor, 1857, p. 1. 



48 SIXTEENTH ANNUAL MEETING OF THE 

and life assets were not passed for many years afterward. In 1849 tne 
Franklin of Philadelphia, the wealthiest of our insurance corporations, 
had assets of $1,328,493. Ten years later the Liverpool & London held 
more funds invested in the United States alone. Added to their figures, 
the prestige of English companies was assisted by English merchants 
and their correspondents in New York, who soon diverted considerable 
business to the new applicants for favor. 

2. Especially convenient to the insuring public were the large lines 
and liberal methods of the newcomers. Doing no agency business, 
and prohibiting, instead of rating adequately, such risks as printing offi- 
ces and drug stocks, the New York locals themselves drove much busi- 
ness of good moral character to their competitors; and the Monarch of 
London paid $20,000 upon Harper & Bros', establishment in 1853. After 
calling for the formation of a mill-owners' mutual in 1855, the Monitor 
said editorially: "From the present practice adopted by the principal 
offices throughout the whole country, the majority of mill-owners are 
virtually deprived of the protection of insurance for an immense amount 
of property." The Massachusetts commissioners complained of the 
same difficulty in the following language: "There is a large and con- 
stantly increasing class of property considered extra hazardous, such as 
steam, saw and planing mills, carpenter and cabinet-maker shops, etc. , 
which it is exceedingly difficult now to insure excepting in second-class 
mutual companies or in foreign companies. " 31 Insurance papers prophe- 
sied disaster to companies recklessly writing single policies in New 
York up to $100,000, and even to $300,000, but they received good sup- 
port, as proven by the city premiums in 1858, when the Liverpool & 
London and the Royal headed the list of agency companies. 32 

3. Again, while American companies stipulated for sixty days in 
which to pay losses, the foreign offices paid with less delay, as their 
policies permitted it and premiums were received in cash. After thirty 
years of retrogression, we now pay losses in cash, and do well if our 
outstanding premiums average less than sixty days. 

4. In their own field English companies were members of the Tariff 
Association, and their agents early made it a point to join the boards 
in this country. This weakened the opposition of local institutions, 
and increased the respect of the public. 

5. Foreign companies have habitually selected special representatives 
for each, while American offices have largely followed the opposite 
course upon the theory of reduced expense. The tendency of the one 

31. Third Massachusetts Report, 1858. 

32. N. Y. Citv premiums in 1858 included the following: Liverpool & London $75,441, 
Royal $49,485, Insurance Company of North America $37,210, JEtna $36,486, Franklin 
$29*839, Monarch of London $21,801," etc. In the Troy conflagration of 1862 the Liverpool & 
London headed the list with losses of $153,313 out of total insurance losses of $1,460,335. 



FIRE UNDERWRITERS' ASSOCIATION. 49 

was to give prominence to the institution itself, while general agencies 
made the companies but a feature of the business. Yet it must not be 
supposed that English companies sprang to the front at once. They 
intrenched themselves more strongly each year until the opportunity 
came to secure the position never since denied them. While six English 
companies received only sixteen millions United States premiums in 
the five years ending with 1870, one hundred and sixty American com- 
panies wrote over one hundred and eighty millions. 

BROKERAGE AND COMMISSIONS. 

Perhaps no change in practice during this period had more to do with 
the later troubles of tariff associations than the spread of commission, 
brokerage and rebate. In 1845 the reorganized New York Board pro- 
hibited the payment of brokerage. Within fifteen years more than 
one hundred local companies were started with varying success, many 
of them joining the Board. Others believed they could do better out- 
side, and besides reducing the rates adopted the brokerage system. 
Brokers rapidly increased in number, hostility grew up between the 
factions, and by the beginning of 1858 there were forty-three companies 
in and thirty-eight out of the Board, the outs employing two hundred 
brokers. Yet so strong were the old companies in reputation and influ- 
ence that they held their own without commissions. After persistent 
efforts in 1858 to form a coalition the New York Board of Fire Insurance 
Companies was formed with a membership of eighty-two out of eighty- 
six companies represented in New York, the new rates being reduced 
about twelve per cent from the old and five per cent brokerage per- 
mitted. Within two months some of the old companies gave notice of 
intention to withdraw unless brokerage was abolished or they were per- 
mitted to rebate five per cent to the assured. In the end, the majority 
voted to allow five per cent to the assured or ten per cent to brokers, 
but, failing to receive the support of two-thirds, commissions were left 
open. As usual a large company advertised a reduction of rates, 
demoralization ensued, and for over thirty years the commission and 
rebate question has caused dissension in New York, in the National 
Board, and throughout the field. 33 

A word will suffice for commission to agents. Originally made five 
per cent, it was early increased to ten per cent by good companies ; and 
after the New York offices competed for agency business it rose in some 
instances to fifteen per cent. While Mr. Bennett censured this figure 
in his 1876 address, his own circular to ^Ejtna agents of March, 1866, 
announced a proposed advance to fifteen per cent, which was prevented 

33. A most elaborate account of the growth of brokerage in New York is contained in 
Mr. Stansbury's address, Insurance Monitor, 1858, p. 100. 



50 SIXTEENTH ANNUAL MEETING OF THE 

by the action of the National Board limiting commissions to ten per 
cent. 34 

NATIONAL BOARD OF FIRE UNDERWRITERS. 

The fourth National Convention met at the close of a long period of 
trouble and loss. 35 During the Civil War the loss of Southern business 
had caused unwise extension elsewhere ; and the reaction in mercantile 
pursuits at its close raised the loss ratio. As insurance had never been 
sold at war prices, the companies had made no preparation for the emer- 
gency. In fact, dividends fell from an average of fifteen per cent to nine 
per cent in seven years. 

Eighty-seven companies from eight States 36 and the two English offi- 
ces 37 were represented. Such was the enthusiasm that the president of 
the National of Baltimore rose in his place and declared that he felt read}- 
to take all the gentlemen present by the hand and recognize in them a 
Board of Directors for his company. A permanent association was 
organized to establish uniform rates of premium and commissions, to 
repress incendiarism and promote good underwriting. It was agreed 
that agents should form local boards in all cities and towns, and advance 
rates materially. No suggestion was made, however, that agents be sup- 
plied with the experience of their companies or made aware which 
classes had been unprofitable. 

It is doubtful whether the convention realized the task undertaken. 
With only two insurance departments in the country worthy of the 
name, local companies in twenty States demoralized the business with- 
out interference as long as they kept out of New York and Massachusetts. 3S 
In New York City the National Board of Fire Underwriters could not 
handle brokerage and rebate ; in Boston the local companies refused to 
admit into their Board the representatives of other State companies ; 
while in St. Louis agents could not induce the local companies to unite 

34. Fire Underwriters' Association of the Northwest, Proceedings, 1876, p. 55, and Insur- 
ance Monitor, 1866, p. 103. 

35. N. Y., July 18,1866. The call was issued June 9th over the signatures of E. W. 
Crowell, I). A. Heald and Geo. T. Hope, a committee appointed for the purpose by the N. 
Y. Board. The Portland, Maine, fire of July 4, 1866, causing an insurance loss of some 
$10,000,000, intensified the feeling among prominent underwriters that co-operation was 
urgently needed. The fire losses from the Revolution, ninety years, were estimated at 
Sl,t'51, 844,517. (This amount is now consumed in ten years;. The conventions of 185 i 
(Louisville, Ky.), 1854 (Cincinnati), and 1865 (New York), have not been considered as 
national. 

36. San Francisco was represented by the appointment of H. H. Bigelow on the first 
executive committee. 

37. Royal and the Liverpool & London & Globe. 

38. The first Ohio report in 1867 showed that few of its stock companies were in good 
condition; and the combined figures of the sixty-six companies, reinsurance reserve e*ti- 
mated to suit themselves, showed a net impairment of §1,136,774. In Kentucky, of nine 
companies, only one had its capital paid up in cash. In Missouri, Michigan and Iowa it 
was little better. Chicago had soared so high that two of the local companies had author- 
ized capitals of $5,000,000 each. Since every large citv had local companies, with tew repre- 
sented in the National Convention, the result of board agents trying to fix adequate rates 
in the West may be more easily imagined than described. 



FIRE UNDERWRITERS' ASSOCIATION. 51 

with them ; and from Philadelphia only two 39 out of forty-four stock com- 
panies sent delegates to the convention. 

Within one year a number of local boards were in operation ; but a 
few sub-committees from the National Board had achieved more thorough 
and intelligent results than agents alone, for the Board representatives 
reported the greatest difficulty in convincing agents of the necessity for 
an advance. 40 At the end of two years losses had fallen as much as 
premiums had increased, and it was as difficult to hold the old members 
as impossible to secure new ones. The most important question pre- 
sented was that of non-intercourse with outside companies. Good agents 
had represented them, as well as National Board companies, for many 
years, and were naturally averse to resigning either. The strife between 
local and agency companies led to much trouble, which the National 
Board could not remove. The competition of an inexperienced company 
resulted in suspension of rates in a New York town, — a new experiment, 
which proved to be an admirable scheme to give the public something 
for nothing, with prizes for overinsured policy-holders suffering loss from 
the friction of hard times. 

Spasmodic reaction in 1869 secured a good attendance at the annual 
meeting ; but an effort to place all companies and fields upon the same 
footing, regardless of existing contracts or local conditions, could only 
terminate as before. The " Chicago Compact," 41 binding the companies 
to disim>s agents for writing at less than tariff rates in either board or 
non-board companies, was too radical a measure to succeed without the 
support of all the leading offices. Companies had relinquished to agents 
that which they once had, — the control of rates, and now found them- 
selves bereft of what they seemed to have, — control of agents themselves. 
A suggestion to put rates under the direction of an executive manager 
was promptly rejected. Even Henry A. Oakley regarded the system as 
"a dangerous concentration of power and opposed to the American 
republican ideas;" while the representative of the International "had 
no idea of putting his company under the control of a Tycoon." The 
National Board next attempted to establish rating bureaus in six depart- 
ments, 42 under board committees, which failed lamentably. 

39. Union Mutual and Girard Insurance Companies. , . 

40. Tariffs were probably based largely upo'i existing- rates, and tables printed n\ 
manuals supplied by A. C. Ducat aud C. C. Hine. It is by no means certain that tariffs 
were adequate. In Boston the new rates on storage risks were sixty per cent below 
similar rates in New York. The Board rejected a uniform tariff presented at the first 
annual meeting, and in March, 1867, the Executive Committee issued two general tariffs 
for the Northern and Southern States respectively. The rating was largely done by 
special agents who had rated two hundred towns in six months. The present form ot 
special rate book was adopted in May, 1868, in New Albany, Indiana, the risks and ratings 
being numbered on each page so that convenient reference could be made on monthly or 
daily reports. 

41. National Board Report, 1868. 

42. The Department headquarters were to be in Hartford, New York, Philadelphia, Cin- 
cinnati, Chicago, and one not designated. It was anticipated that the expense would be 
$45,000. 



52 SIXTEENTH ANNUAL MEETING OF THE 

For a moment it may be profitable to consider the first suggestion 
of an anti-compact bill. Under instructions from the Massachusetts 
legislature its insurance committee presented an elaborate report upon the 
National Board of Fire Underwriters in 1869. 43 A single paragraph may 
be quoted : " It does not appear to your committee from the evidence 
presented that there is a combination of insurance companies detrimental 
to the public interests. On the contrary the fact seems to be established 
that there is simply a combination of common sense, information and 
experience to preserve the solvency of fire underwriters, and ultimately 
reduce the cost of insurance to the public. It is true competition is the 
great regulator of prices ; but, in insurance, competition is local, while 
the statistics upon which insurance is based must be drawn from a wide 
field. ' ' The committee added that the public always has the privilege of 
forming new stock or mutual companies when rates seem too high. 

In the meantime there were not wanting intelligent men who firmly 
believed each company must manage its business for itself, and even 
appeared in print decrying the ''unnatural confederation." In Chicago 
the cry was, "Let us recognize the fact that the National Board is vir- 
tually dissolved, and have peace from the silly whining of those who 
would fain convince us that wisdom died with it." 44 Yet the Board had 
increased the income of companies reporting in New York over twenty- 
four million dollars by raising the average rate. Its members could not 
entirely close their eyes to its benefits, but with the present good before 
them the}- were disposed to ignore the danger ahead." 15 Suggestions for a 
statistical bureau were repeatedly defeated, though the result of sending 
out uninstructed surveyors was declared to be that li agents were dis- 
satisfied with intermeddlers, regarded the Board as their enemy, the 
assured questioned the correctness of new rates and found no man who 
could by any statistics or logical facts answer their objections.'' 46 ^Yith 
so much to contend against, it is not strange that board rates were 
declared advisory in March, 1870. 47 But if the leaders in the profession 
could not agree, and the rank and file were uninstructed, another class 
of men sprang up who built the permanent structures of later years. 
Local board and field w T ork developed talent in all directions. The 
Toledo Board prepared a system of schedule rating which was gradually 

43. The report filled ten columns of the Insurance Times (1868. p. 42-3 a . and in -tating 
the objects of the National Board laid the greatest stress upon the intention to ascertain 
the precise cost of insuring various classes, and approximate the business to an exact 
science. 

44. Insurance Monitor, 1869, p. 617. 

45. The average underwriting profit of the leading companies for the preceding ten 
years had been only 1.23 per cent. Without the Board they could not hope for profit. 

46. Insurance Monitor, 1870, p. 397. 

47. This was an act of the N. Y. Board, the National Board having held its annual meet- 
ing^ month earlier ; but demoralization had already set in elsewhere. The avi 

of premium were, sixty-six cents from 1862 to 1865, ninety-three cents from 1866 to 1869, 
and eighty-nine cents in 1870. 



FIRE UNDERWRITERS' ASSOCIATION. 53 

extended against strong opposition from old underwriters. 43 The special 
agents organized the Fire Underwriters' Association of the Northwest, 49 
whose printed proceedings form a general insurance library unexcelled 
by any other series. 

CHICAGO FIRE. 

As the companies hastened along in fancied security at an ever-increas- 
ing pace, a single event broke the column and for a few days hushed all 
dissension. The limits of this paper forbid detailed description of 
the Chicago fire. 50 The property loss was estimated at from $153,000,000 
to $165,000,000, sums practically beyond comprehension. The insurance 
losses amounted to $96,000,000. Chicago had been an unprofitable town, 51 
yet the local companies had no trouble in finding stockholders anxious 
to prevent Kastern and foreign companies from " taking money out of 
the country." 52 The Illinois legislature enacted a deposit law in 1869, 
requiring $200,000 each from foreign companies ; and the Imperial, 
Queen, Commercial and Royal withdrew, leaving only the Liverpool & 
London & Globe and North British & Mercantile in the field. The 
losses by the conflagration were divided among : 

Illinois companies $31, 706,633 

Other State companies 58,437,305 

English companies 6,409,782 

Totai, $96,553>72o 53 

Eastern companies with small capitals, too weak or too wise to venture 
abroad, seized the opportunity to decry agency business, denying with 

48. President Oakley, in 1874, remarked the strangeness yet necessity of having to stand 
before the Board to advocate the superiority of schedule rating. A preliminary survey of 
Cincinnati had disclosed 218 party walls less than twelve inches thick. 

49. The first meeting was held in Dayton, Ohio, February 22, 1871 ; and the organization 
was then called the " Association of State, General and Adjusting Fire Insurance Agents of 
the Northwest." After the Chicago fire it was auxiliary to the National Board, and its 
meetings were attended by delegates from the Executive Committee. Its membership 
probably furnished the working force which organized the Western Union. 

50. The description written by the elder Hewitt for the Insurance Times is said to be the 
best. Only a month earlier a letter from Chicago spoke of its seventeen engines and 
efficient fire department, and stated that new water works and thirty-six-inch mains in 
the principal streets were in contemplation. 

51. The losses had been excessive for four years, and eleven companies withdrew volun- 
tarily early in 1871. 

52. The Merchants of Chicago reported the extraordinary sum of $300,000 per annum 
fire and inland premiums taken over its own counter, in addition to receipts from agencies 
and investments. The company incurred $6,000,000 loss in the conflagration and paid but 
a small portion. 

53. The exact amount paid by the companies cannot well be ascertained. The Illinois 
Insurance Report, in 1872, estimated the losses as above, the salvage and discount thereon 
$i,173,76J, and amount paid by January 1, 1872, $37,995,731. Of the latter there was fur- 
nished by companies of New York $10,599,207, Connecticut $7,460,<>71, England $1,966,225, 
Illinois $3,138,956, Massachusetts $2,581,275, Ohio $2,129,171, Pennsylvania $1,910,4*4, Cali- 
fornia $1,801,291, etc. The heaviest losses incurred were: Illinois $31,706,633, New York 
$24,181,194, Connecticut $12,229,625, England $6,409,782, Ohio $5,611,944, Massachusetts 
$4,814,727, California $4,694,530, Pennsylvania $2,492,413, etc. The Illinois Auditor expected 
the ultimate amount recovered to reach $53,000,000, but the general opinion seems to be 
that it did not exceed $40,000,000. 

F. U.A. 4. 



54 SIXTEENTH ANNUAL MEETING OF THE 

the utmost assurance the possibility of large fires in their cities. The 
great agency companies had little difficulty in securing new capital 
required. 54 For the rest, some sixty-five companies were bankrupt, and 
the others reduced their capitals or secured enough to make up the 
impairment. State supervision had made such changes that the possi- 
bility of going on without this action was never considered. The Ameri- 
can companies losing over one million dollars were the ^Etna and 
Hartford of Hartford, Continental, Home, Lorillard, Manhattan, Market 
and Security of New York, Independent of Boston, Pacific of San Fran- 
cisco, and eleven Chicago companies. The two English companies, sub- 
ject to no American restrictions with reference to their head-office accounts, 
had only to keep their New York deposit capital of two hundred thou- 
sand dollars unimpaired. 55 The Liverpool & London & Globe and North 
British & Mercantile agents were instructed to draw upon London for 
the full amount of their losses, over six million dollars, leaving their 
American funds untouched. 56 This gained the confidence of the insurance 
public ; and while they were no more entitled to this than the strong 
New York, Hartford and Philadelphia companies, public faith in the 
indemnity offered by American institutions was severely shaken by the 
fall of millionaire companies like the Andes, Lorillard and Security of 
New York and Pacific of San Francisco. 57 

In the following May the National Board met with a reduced member- 
ship and all its work to do over again. A proposition to appoint a general 

54. The failure of so many American companies is apt to detract from the creditable 
record of the stronger institutions. Not only were the losses of the iEtna and Hartford, 
Home and Continental and others promptly met, but the demand for new stock far 
exceeded the capital asked for by the Directors. 

55. It does not seem probable that the capital of either company was impaired by Ameri- 
can losses, but the surplus funds (tire and life surplus being combined) were largely 
reduced. The fire reinsurance reserve was estimated upon the basis of only thirty-three 
and one-third per cent, considered ample in England. The annual premiums of the Liver- 
pool & London & Globe in 1870 amounted to 84,658,640; but of this only $1,686,907 was 
written outside of the United States. In 1871 the fire-loss ratios of these companies were : 
North British & Mercantile 97.65, and Liverpool & London & Globe 101.17. The Liverpool 
& London (organized in 1836) had amalgamated with the Globe (1803), an old and wealthy 
London company, in 1864, and the North British of Edinburgh with the Mercantile of 
London (a non-tariff office organized by merchants in consequence of the increase of rates 
after the Tooley-street fire) in 1862. 

56. An example set by the Imperial after the Patterson warehouse loss of $370,000 in 
Philadelphia in 1869, upon discovering the existence of an impression that the loss would 
not be promptly met or in full. 

57. It is not strange that the English offices were anxious to conserve their American 
business. The then managing director of the Liverpool & London & Globe, Mr. Swinton 
Boult, remarked in 1876 that " the American business was the best to be had. Up to the 
Chicago fire all the money made by his company, by common observation, had been made 
in America" {Spectator, 1876, p. 106). But it is 'interesting to contrast the result with the 
prophecy of the Monitor in an editorial in 1859 (p. 60): "What will be the extent of the 
security afforded by foreign companies in the event of another fire of the magnitude of that 
of 1835 or 1845? Until the first of these conflagrations, New York had not been visited by any 
great one for over fifty years, and it is reasonable to expect that we will never again have any 
on so large and destructive a scale. For our necessities, therefore, our domestic companies 
may be considered in the fullest degree ample for security. Many of them have surpluses 
greater in amount in proportion to their capital than the foreign ones, and, limiting the 
amount of their risks in accordance with their means, are quite as competent to meet 1 

of equal magnitude as those of 1835 and 1845, and as fully pay for them as the British compa- 
nies, and with no inducements to impoverish the country by sending their profits out of it." 



FIRK UNDERWRITERS' ASSOCIATION. 55 

agent of the Board was adopted with little objection, for it was easier 
to agree than formerly. The effort to increase rates after the Chicago 
fire had failed, as the advance was too marked (equivalent to one hun- 
dred per cent in some cities), was without organized support, and the 
rates were cut heavily by non-board companies. 58 There were nearly one 
hundred and fifty companies with reported assets of forty-two million 
dollars without any loss at Chicago ; and while many of them were weak 
others had more than a million dollars invested. 

BOSTON FIRK. 

While the reconstructed companies were feeling their way along, and 
the public smarting under disturbance of rates, the second blow came. 
The Boston conflagration in 1872 increased the number of bankrupt com- 
panies to one hundred. The burnt district only covered sixty-four acres; 
and the cry of the locals that Eastern cities would not burn was silenced 
by an insurance loss of $56,000,000. 5: * The companies did not recover as 
promptly as a year before, for capital was not as easily obtained. The 
panic of 1873 was just ahead. Those who are fond of asserting that 
insurance losses do not affect the country at large will do well to con- 
sider the result of throwing insurance policies on the market to the 
extent of $152,000,000 in two years, only $75,000,000 of which could be 
redeemed. 

The National Board called a special meeting immediately after the fire. 
The report presented by the new General Agent proved the wisdom of his 
appointment. He had telegraphed and written local boards after the 
disaster to increase rates ; the result was a sad commentary upon his 
opinion adverse to the central control of rates. Only three boards made 
a positive advance, and two prominent boards had not only pocketed the 
circulars but voted formally that in their view any advance in rates was 
inexpedient. The National Board at once gave to State associations the 
power to revise local tariffs, and directed a general advance on outside 
business, and increases of from thirty to fifty per cent in large cities. 
The conflagration hazard was ever before them. 

The next four years were the brightest in National Board annals. The 
administration was energetic, the General Agent had able men in the 

58. The strong minds in the Board once more drew attention to the absolute necessity of 
learning accurately the cost of insurance to convince the public of the propriety of any 
advance upon particular classes, but no unanimity could be developed. 

59. The National Board Report for 1873 records the losses: 

Massachusetts companies $35,411 ,104 

Other State companies 15,818,520 

Foreign companies 4,864,458 

Total $56,094,082 

Of this it was estimated that the foreign and most other State companies paid in full, and 
the Massachusetts companies about $15,180,000. Although the total insurance losses were 
so much smaller, the Boston policy-holders received about the same amount as Chicago 
policy-holders did the year before. 



56 SIXTEENTH ANNUAL MEETING OF THE 

field, and premiums increased forty per cent in the aggregate. But the 
local board system did not work smoothly, and " More annoyance and 
hindrances to the operation of the National Board were caused by agents 
than by the combined opposition of local companies and the public." 60 
There were three inherent defects in the reorganization: i. The want of 
faith on the part of members of the Board ; 62 2. The increase in rates was 
too great ; 3. The agents were uninstructed and ill-prepared to meet the 
criticism of non-board agents upon their rates and methods. But text- 
books are not the fashion in fire insurance, and older underwriters 
were less willing in those days to instruct the inexperienced than they 
are now. As one officer remarked sarcastically when tendering his 
resignation of a position in a large State board, " He respectfully declined 
to act as a professor in so distinguished a college." 

As early as August, 1875, the prophets predicted the breaking up of the 
National Board. The most popular complaints were that it persisted in 
fixing rates itself, and that its decrees were harshly executed. The Gen- 
eral Agent saw the difficulty ahead, and in a strong and sound report 
drew attention to the fact that the agent whose business fell offsomewhat 
in a dull year at once laid the blame on the Board or the rates or non- 
board competition instead of assigning the true causes, — "Continued 
depression in business circles, decrease in stocks and shrinkage in 
values. ' ' 

Elaborate reports were presented to the National Board at its decennial 
in 1876, its last year of general work. This had grown to such an extent 
that the expenditures of the previous year amounted to $133,377. The 
growth of feeling among members that too much power was exercised 
by the executive committee was remarked by the President, and more 
frequent meetings of the Board itself were resolved upon. It had often 
seemed politic to leave vexing questions untouched when full accord 
could net be reached, but delay had usually confirmed the views of the 
older heads. It is not surprising, therefore, to find the clear-cut advice 
that agency business of board members be completely severed from that 
of other companies. The sentiment was applauded, yet the Board refused 
to legislate accordingly. A committee of fifteen members was finally 
charged with the task of recommending changes in the administration of 
the Board. 62 

60. The intelligent portion of the community realized the value of the Board. When in 
1875 three or four companies withdrew from the N. Y. Board because of alleged malpractice, 
so good had been the educating influence of great conflagrations that two leading daily 
papers, instead of exulting over the event as the forerunner of disruption, printed temperate 
articles expressive of regret that some means could not be devised to guarantee an adequate 
income for the companies, afford ample protection to policy-holders, and assure the accum- 
ulation of reserves for future losses. 

61. " Give us two moderately profitable years, and ignorance will break down rates. As a 
rule, the American underwriter cannot stand prospeiity." — R. Garrigue. 

62. The committee could not secure a majority vote of its members for any material 
alteration in the Board, but it recommended the establishment of a Western Department, 



FIRE UNDERWRITERS' ASSOCIATION. 57 

At the semi-annual meeting in the fall of 1876, the latent differences 
burst forth. Composition of the executive committee provoked heated 
discussions, and New York and Philadelphia members clearly showed 
their intention to control the organization. They were honest enough 
in this opposition, for Mr. Piatt gave utterance to the fear that the Board 
would have in its high offices, and on the executive committee, men from 
the East, West and South who did not understand underwriting. The 
old reluctance to teach new men still existed ; yet nothing better could 
have happened for the West and South than the training of their lead- 
ing insurance men by more frequent association with the brightest men 
in the profession. 

In May, 1877, the National Board met to yield up its control of rates in 
the United States. The members attended the meeting with such a 
termination in view, and President Chase's address anticipated it. Ashe 
remarked, " The companies were never stronger, and nothing could be 
more natural than for them to imitate their predecessors and kick from 
under them the ladder by which they had climbed. 63 A long discussiou 
ended in the adoption of resolutions that rates be left to local boards, 
that all field service be dispensed with, and the cost of board work 
reduced to fifteen thousand dollars per annum. The only companies 
opposing the change were the Queen, Commercial Union, Howard, 
Phcenix of Brooklyn, Connecticut, Home of Columbus, American Cen- 
tral, St. Joseph and Firemaus Fund of San Francisco. The resolutions 
recited that all efforts to conciliate outside companies had failed, the 
expense of fixing correct rates had not been shared by them, respectable 
and strong companies had recently joined the others, 64 rates had been 
fixed for nearly all the risks in the country, so that local boards need 
simply maintain them, and that these boards were fully informed of the 
principle of, and necessity for, adjusting rates to hazards. The Gen- 
eral Agent in his farewell address uttered no more striking sentence 
than the warning, if future misfortune should overtake the companies, 
not to establish rates at a standard which could not be successfully 
maintained. 



having equal power and authority with the Eastern. A minority offered a report proposing 
such radical changes that it found no advocates but its signers. The report proposed the 
relegation of all matters of rating and discipline to State or district Boards under the 
general direction of a committee on clasification and rates, charged with preparing systems 
of schedule and minimum rating to be gradually extended over the whole country, leaving 
the Executive Committee to attend to all other matters. 

63. Yet the year 1876 had been so unfavorable that thirty-nine out of 101 companies 
reporting to the N. Y. Department had paid out more than they received. The 1 resident 
insisted that there was no more important feature of National Board work than tbe 
maintenance of an adequate rate of premium." His appeal was pressed home witli tne 
words: "If we should add to the already tierce competition that of the sixty companies 
now writing at substantially the same rate, how long would it take to ascertain by bittter 
experience what was not an adequate rate? " 

64. The Royal, North British & Mercantile and Lancashire withdrew in December, 
1876. 



58 SIXTEENTH ANNUAL MEETING OF THE 

The changes of fifteen years must reconcile us to the view that dis- 
ruption of the parent organization 65 was necessary for the development 
of sectional associations. For a time there was the inevitable scramble 
for business ; and the average rate in the United States declined from 
eighty-eight to seventy-six cents in two years. Reduction in rate, how- 
ever, meant reduced income to agents, and self-preservation compelled 
them to move as no mandate of company or board had done. 

UNITED FIRE UNDERWRITERS IN AMERICA. 

Though not a tariff association it is needful to mention the largest 
body ever organized for the advancement of fire-insurance interests in 
this country. In 1878 and 1879 the °ld guard in the National Board, too 
impatient to wait for demoralization to fix its lessons deep in the minds 
of the inexperienced, had sought for reorganization. Finding this 
impracticable, they conceived a new association to deal with general 
insurance matters apart from rates and commissions. Yet these ques- 
tions were brought up at the first meeting, and it was admitted in 1881 
that hostile criticism of the organization was due to its studious avoid- 
ance of the two subjects outside of its jurisdiction. The association 
finally decided to district the country in six departments for the purpose 
of reorganizing local boards, establishing tariffs and commissions. Only 
four district organizations were completed. 66 The chairman of the Sixth 
District Committee, Mr. D. J. Staples, reported four meetings held, 
terminating in a recommendation that all members of the United Under- 
writers join either the Board of Fire Underwriters of San Francisco or 
the California Underwriters' Association. An attempt was soon made to 
transfer these district associations to the direction of the National Board, 
but the Hartford companies opposed it. The third meeting of the 
United Fire Underwriters in America (1882) was almost wholly devoted 
to the commission question ; and a long discussion, in the course of which 
Mr. Geo. T. Hope made his nineteen points against insurance compa- 
nies, 67 terminated with an agreement that fifteen per cent should be the 
maximum outside of excepted cities. Here the practical work of the 

65. The National Board of Fire Underwriters continued its existence, and meets annually 
in May ; but it soon fell to the position of an association for considering State department 
statistics, legislation and taxation, and the repression of indendiarism. The administration 
of President Alfred G. Baker of the Franklin of Philadelphia is best remembered by his 
addresses, classic in style and full of faith, and by the last but earnest efforts of the Commit- 
tee on Statistics. Following soon after came the administration of Daniel A. Heald, 
President of the Home of N. Y., whose annual reports during the ten years ending with 
1891 are constantly appealed to as the standard of all fire insurance statistics. Probably no 
other man has written and accomplished so much for the associated interests of fire under- 
writing in America. 

66. Second district, Associated Fire Underwriters of the States of New York, Pennsyl- 
vania, New Jersey and Delaware; third district, Associated Fire Underwriters of the states 
of Maryland, Virginia, North Carolina, West Virginia and District of Columbia ; fourth dis- 
trict, Associated Fire Underwriters of the States of South Carolina, Georgia, Alabama and 
Florida; and .fifth district, Underwriters' Association of the Southwest, States of Mississippi, 
Louisiana, Arkansas and Texas. 

67. Insurance Monitor, December, 1882. 



FIRE UNDERWRITERS' ASSOCIATION. 59 

association ceased, district work was left to take care of itself, and the 
United Fire Underwriters in America disbanded in 1884. Self-reliant 
underwriters have insisted for thirty years that insurance associations 
should let rates and commissions alone and devote their energies to 
other matters ; but the majority is largely against them. 6 * No tariff 
association ever failed without being followed by an attempt on the 
part of some of its members to organize another at the earliest possible 
moment. 

WESTERN UNION. 

About October, 1879, the general agents in the West formed an asso- 
ciation in Chicago, now known as the Western Union. Fifteen per cent 
maximum commission, renewal of business at not less than existing 
rates, and the spread of the local board system, were the principal 
features. Beginning in five States, the Western Union has since extended 
its work to cover seventeen. Excepted cities were necessarily named 
in the beginning, but have been reduced to seven in number. The 
membership is personal, meetings secret, and no annual reports are 
published. The local boards largely fix rates under the direction of five 
" commissions." Probably the field is the hardest in the United States 
to control by a tariff association. There are sixty- three companies in the 
Union (including all but one of the eighteen foreign offices), and about 
nineteen outside, exclusive of Western mutuals and small locals. 
Besides ordinary competition, which is not serious in rates, as they are 
sustained by many non-union companies, there is the old trouble of 
National Board days, — the representation of outside companies by Union 
agents. The latter are strictly limited to fifteen per cent by the Union, 
but are offered, and frequently accept, twenty per cent from others rep- 
resented by them. There is an admirable spirit of unanimity among 
members of the Union which has so far preserved it under such heavy 
blows as the passage of the anti-compact law of Ohio and the withhrawal 
of a strong English company. However, if the figures published are 
correct, the Union companies are suffering largly in the character of 
business written for them, and will be forced ultimately to adopt correct- 
ive measures. 

NEW ENGLAND INSURANCE EXCHANGE. 

Near the close of 1882 a call brought together twenty-seven special 
agents in Boston for the purpose of rating paper-mills. The warm sup- 
port received from companies induced the organization, January 6, 1883, 



63. The Southeastern Tariff Association once passed a strong resolution (Report, 1888, p. 
40) answering the contention of some members that they possessed the right to exercise 
individual judgment in the matter of rates: - ; Resnlved.it is the sense of this Association 
that no such right exists, but on the contrarv it is the bounden duty of every such mem- 
ber, in simple good faith, strictly to observe each and every rate; and whenever, in trie 
opinion of anv member, any risk has been erroneously rated, the error, if any, can De 
properly corrected in one way only, viz., by action of the Association alone through its 
duly delegated channels. " 



GO SIXTEENTH ANNUAL MEETING OF THE 

of the New England Insurance Exchange, having for its active members 
special agents only. It is charged with the encouragement of local 
boards, establishing specific rates on hazards through exchange com- 
mittees, but leaves commissions to the companies themselves. It holds 
weekly meetings, and the annual reports contain evidence of hard work. 
When it was organized the premium receipts of New England were only 
twelve million dollars, but by the census of 1880 there were over thirty- 
three thousand manufacturing establishments in the district, showing 
the character of work before the Exchange. As early as 1885 the inroad 
of manufacturers' mutuals had been such that " in certain lines of hazards 
there was practically nothing left in New England worthy the attention 
of the stock companies." Organized by manufacturers thoroughly 
familiar with their hazards, these mutuals restricted their risks to plants 
in their own line. It was u a competition of systems, not a rivalry of 
men and agencies." The Exchange created a factory improvement 
committee to deal with the question, who have so well learned the lesson 
set before them that manufacturers new in the field are offered accepta- 
ble terms, even when compared with rates named by mutuals reporting 
an expense ratio of 7.16 per cent. Electric-light hazards have received 
special attention. The early opposition of the electric-light companies 
soon gave way, and the exchange system of inspection was found so 
helpful in extending their plants that the inspection department is no 
expense to the Exchange, as assessments to support it are levied on the 
electric-light companies. In 1890 the assessments amounted to $2, 200. 

In recent years the stock companies have had to meet another form of 
competition in New England, — that of the dwelling-house mutuals. 
Originally intended to cover detached dwellings, they have gradually 
extended their operations to cities and included mercantile property as 
well. If they will only continue this latter course they may be expected 
to end as all similar concerns. But in the meantime they secure a large 
part of the dwelling risks, agents represent them in the same office with 
stock companies, and no little friction results. 

Co-operative or concurrent inspection has been considered, to avoid 
tjie charge of annoying owners of hazards with a hundred visits from 
specials, each with his own suggestions for improvement ; but, as the 
Exchange was not ready to act, a number of the companies formed a 
Bureau of United Inspection about four years ago. The Exchange early 
adopted the view that schedule rating is the only correct and perma- 
nently successful system, minimum rates being seldom used. The organ- 
ization has been criticised for reducing rates and using up the time of 
special agents at weekly meetings ; but the one one would have hap- 
pened much sooner without it, and the " school for oratory," so-called, 
is producing practical men who seem likely to stand at the head of the 
profession, if they have not already reached that position. 



FIRE UNDERWRITERS' ASSOCIATION. 61 

SOUTHEASTERN TARIFF ASSOCIATION. 

The seed sown by the United Fire Underwriters in America was not 
without results. The fourth district association was permanently organ- 
ized in August, 1882, as the Southeastern Tariff Association. Reports of 
its first six years are out of print, but the remainder evince an amount 
of interest and diveresity of work that may be envied by any similar 
association. The membership is corporate, not personal, and nearly all, 
if not all, the companies in its field are connected with the association. 
The executive and other committees are selected from among the general 
and special agents. In its important features the new tariff was not 
modeled after any previous work ; for schedules of risks peculiar to the 
South, such as cotton, phosphate and cotton-seed oil mills, were unknown 
until the association attempted them. The reports furnish much that 
is novel and interesting, illustrative of the special difficulties encoun- 
tered by Southern underwriters. Notwithstanding the known inflamma- 
bility of cotton, marine offices have been in the habit of covering it from 
the time it is received by railroads in the interior until delivery in ports 
of destination abroad, instead of leaving the shore risk to fire companies. 
It is estimated that short-rate premiums on about half the cotton crop 
are thus diverted. Mutual competition, too, has had its effect in the 
South, particularly upon sprinkled risks. The system of the Southeast- 
ern Tariff Association seems to differ from ours, as there are five compact 
offices, all distinct and said to be in charge of inexperienced underwriters. 
Their operation costs about one to one and one-fourth per cent of the 
net premiums, which seems high. But the local board system was 
retained to such an extent that there is too much divided authority ; and 
the stamping of daily reports by board secretaries has been suggested. 
The association seems to be well established. The anti-compact law 
recently passed in Georgia was aimed at it, but until this has been tested 
its effect cannot be known. 

It is impossible to even touch upon the remaining tariff associations 
east of the Rocky Mountains, nearly all of them having small fields. 
The New York Tariff Association has just been organized with good 
promise ; and there are now few spots on the map of the United States 
where demoralized competition has a footing. 

PACIFIC INSURANCE UNION. 

It would be presumption on the part of a new member of this Asso- 
ciation, with practically three years' insurance experience, to offer an elab- 
orate account of Pacific Coast Tariff Associations in the presence of their 
founders. The best authorities upon the subject are letters written 
to New York by Mr. C. T. Hopkins beginning with 1857, and the 
papers written by Mr. Chas. D. Haven and ex-Presidents Carpenter and 



(V2 SIXTEENTH ANNUAL MEETING OF THE 

Dornin. 6> The first Boards handled little but San Francisco business, 
charging fifty per cent additional in Sacramento, Marysville, Stockton, 
San Jose and Portland, and double city rates in the country. The Board 
of Fire Underwriters of San Francisco, reorganized in 1872, was supple- 
mented by the California Underwriters' Association in 1881. The compact 
system tried originally in Kansas City had been so successful that Pacific 
Coast underwriters organized the Compact Association of the Northwest 
in Portland in 1883 as an experiment. This led the w T ay to the Pacific 
Insurance Union covering the entire Coast, which united the two San 
Francisco Boards and the non-board element, leaving not a single com- 
pany or agent in the field unbound by its rules and rates. Since the 
Union was formed, Coast premiums have increased from $6,373,976 to 
$11,610,390 ; yet they are now only about the same as receipts in New 
England when the Exchange began its work. 

As nearness to any object magnifies its blemishes there may be excuse 
for occasional criticism of the Pacific Insurance Union ; yet it seems 
strange to find more unfavorable than approving references to it in our 
past proceedings. Papers have been written to show that the compact 
is not desirable ; that it prevents freedom of decision and makes our 
agents and specials machines ; that it is fettered by vacillation and 
delays ; and that its future cannot be progressive. Yet the fact remains 
that the Pacific Insurance Union has achieved w r hat no other insurance 
association has ever done for a fourth of the same time, — the unity of 
diverse interests, and the establishment of uniform rates with a single 
series of rules and forms in a field comprising 860,000 square miles. The 
daily reports of risks covering nearly six hundred million dollars 
annually are passed through and recorded in three offices. 70 

Summing up the growth of tariff associations we find : An association 
of officers in the metropolis, broken and reformed as new capital was 
introduced with inexperienced management ; the early conventions, 
feeling their way and having little to work with ; changes caused by 
good field work abroad and improvements at home under pressure of 
higher standards of solvency; the formation of the National Board after 
demoralization resulting from the Civil War ; decline of the central 
power, which "required dwarfs and giants to raise the same weight ; " 
the upheaval of insurance in America by great conflagrations engulf- 
ing a hundred companies ; reorganization of the National Board with 

69. Since this paper was written the writer's attention has been directed to the review of 
Pacific Coast insurance up to the centennial year, printed in the Coast Review for July, 
1876, the most complete paper upon the subject now extant. Mr. Haven's paper was 
printed in the Knapsack (h\ U. A. P., Proceedings, 1887, p. 43); Mr. Carpenter's wis bus 
annual address as President (1884, p. 7); and Mr. Dornin's was read before the hire Under- 
writers' Association of the Northwest in Chicago in 1878. 

70. San Fraucisco, Portland and Salt Lake City. In place of the commissions dividing 
the Western Union field, the Pacific Union is made up of three districts : A, comprising 
California, Nevada and Arizona; B, Oregon and Washington; C, Idaho, Montana and 
Utah. 



FIRE UNDERWRITERS' ASSOCIATION. 63 

excessive rates, for which agents were furnished with no logical reasons; 
strengthening of the non-board element by high rates ; relegation of 
rates to local boards, and immediate decline in the average; a futile 
effort to govern the business by an association which ignored its selling 
prices and expense; the rise of intelligent middle-men to the needs of 
the hour, and organization of the Western Union, New England Insur- 
ance Exchange and Southeastern Tariff Association; lastly the Pacific 
Insurance Union, embracing the principal representatives of all the com- 
panies in its confines, controlling both commissions and rates, fixing the 
latter entirely through surveyors independent of any company, and 
passing upon the form of every risk written within its jurisdiction. 

In all the seventy years, we have failed to find a period of even five 
years without tariff associations in existence; and the present associa- 
tions have lasted during periods averaging one-fourth of the time 
during which agency business has been conducted in this country. 71 It is 
time to drop the cry that boards have always broken and will continue 
to break, and to instruct our field and office men that boards are 
always forming and the insurance business is a farce without them. We 
have no better reason to expect the early dissolution of the Pacific 
Insurance Union on account of the failure of imperfect local boards 
than to look for the fall of the American Union because of the failure of 
so-called republics in the past. As was well written twenty years ago: 

"There is but one course that can be pursued to protect legitimate 
capital, — a uniform tariff, adequate to the risk, with the power behind to 
enforce obedience, and a mind to be satisfied with the amount that can 
be secured in honorable competition." T - 



71. The leading tariff associations in the United States were organized from seven .to 
thirteen years ago, and have an average life of at least ten years: and it is doubtful il 
agency business is worthy of consideration for more than thirty years back. Certainly a 
system whieh might have answered for the transaction of tire insurance in 1861, with 
$10,527,327 reported United States premiums, could not safely be relied upon lor the hand- 
ling of over $110,561,043 in 1891. 



72. Insurance Monitor, l$t>9, p. 47. 



] J Fire Premiums, 
- Expenses. 
_ Fire Losses. 



1 inch z $15.000,000. 





$ 1 05, 000,000 



$90,000,000 



. $75, 000,000 



$60,000,000 



$45,000,000 



$30,000,000 



$15,000,000 



66 



SIXTEENTH ANNUA!. MEETING OF THE 



FIRE INSURANCE IN THE UNITED STATES, 1859-1890. 



Premiums. 

$ 14,413,458 

11,866,548 

10,527,327 

11,308,418 

14,019,658 

........ 20,141,152 

25,419,589 

32,281,404 

36,162,138 

37,395^578 

39,353,578 

37,237,621 

43,456,512 

55,341,205 

62,818,069 

61,645,202 

60,616,728 

55,522,596 

54,794,956 

51,973,173 

53,677,098 

61,934,305 

69,002,915 

75,829,803 

86,013,651 

90,070,350 

92,584,816 

95,266,254 

99,069,206 

104,427,850 

107,835,349 

1890 114,227,076 



1859 

i860 

1861 

1862 

1863, 

1864 

1865 

1866 

1867 , 

1868 . 

1869 . 
1870. 

1871 . 

1872 . 
1873- 
1874. 
1875. 
1876 . 

1877. 
1878 . 
1879. 

1880 . 

1881 . 

1882 . 
1883. 

1884 . 

1885 . 

1886 . 
1887. 
1888 . 
i88q . 



Losses. 

$.8,031,247 
6,993,63o 
6,249,689 
7,056,731 
5,656,975 
11,356,624 
17,264,618 

23,913,745 
20,818,269 

19,283,979 
20,054,341 
21,869,440 
39,716,885 
45,152,949 
37,73 J , 633 
26,199,313 
28,590,622 
28,051,402 
31,035,109 
26,336,058 
31,542,243 
33,518,698 

38,545,919 
44,315,467 
49,760,942 
55,307,680 

53,409,579 
51,776,346 

59,904,991 
60,570,624 
66,495,294 
60,982,460 



Expenses. 
$ 4,004,557 

3,741,323 
3,484,593 

3,569,905 
4,500,850 
6,861,790 

9,403,134 
11,791,369 
13,124,292 
33,874,810 
14,924,366 
15,128,290 

14,539,755 
17,480,569 
20,123,535 

20,545,691 
21,479,700 
21,086,968 
20,552,436 
21,684,925 
21,033,756 
24,203,211 
25,614,493 
28,839,253 
31,808,890 
33,156,134 
35,679,8o6 
36,151,527 
37,398,864 
39,296,192 
40,537,224 
42,692,505 



$1,786,233,583 $1,037,493,502 $658,314,713 
The small margin realized from the above business will be apparent 
upon examination of the diagram. The average underwriting profit for 
the term was nominally about 2.26 per cent, as shown hereunder : 

Fire premiums thirty-two years $1,786,233,583 

Fire losses $1, 037, 493,502 

Expenses 658,314,713 

Unearned premiums, say .... 50,000,000 1,745,808,215 

Surplus, 2.26 per cent $40,425,368 



fire underwriters' association. 67 

But the figures exhibited, which are taken from reports of the National 
Board of Fire Underwriters, only include the Chicago and Boston losses 
of solvent companies ; so that, to show the true results of business in 
187 1 and 1872, it would be necessary to add to the losses of the first, say 
$12,000,000 for losses paid by companies not reporting, and $55,000,000 
for losses incurred but not paid ; and add to the second, say $17,000,000 
for losses paid by companies not reporting, and $20,000,000 for losses 
not paid. The statistics comprise the figures of American companies 
only to 1870, inclusive, as reported to the New York Insurance Depart- 
ment ; of American and foreign companies combined from 1871 to 1881, 
inclusive, reporting to the same department ; and of all companies 
reporting to the various insurance departments throughout the country 
from 1882 to date. 

THE FUTURE. 

With past experience to guide us there is no impropriety in consider- 
ing how the work of the Pacific Insurance Union may be extended or 
improved. As this part of the country grows it must prepare to meet 
such changes as increase of manufacturing risks, extension of electric 
lighting, automatic-sprinkler protection, the conflagration hazard, etc. 
These, however, may largely be included in a scientific study of the 
cost of insurance. Have you noticed that, while the amount written in 
California has increased thirty-four per cent in the six years of Union 
work, the amount spread over the remainder of the Coast has increased 
150 per cent? 73 Is it not time for us to learn from what classes this 
increase of liability comes? and, if our rates must ultimately be adjusted 
to meet it, to what classes reductions or additions should rightfully be 
assigned ? It was shown in a convincing address by Mr. Mullins, before 
the legislative committee in 1889, 74 that rates had been reduced under the 
direction of the Union. But have losses decreased or even maintained 
the same level ? On the contrary the ratio of loss to amount written 
during the six years of Union work increased thirty-five per cent over 
the same ratio for the preceding six years, while the average rates 
showed an increase of only seventeen per cent. 75 Either term business at 
inadequate rates is developing the loss so long latent, or the state out- 
side of San Francisco must be suffering from more destructive fires. 
Questioner, in 1S87, seems to have overlooked this, and considered noth- 
ing but the advance in average rate, 76 which in itself never proves 

73. California risks written: 1885, $282,256,308; 1891, $378,529,165; Pacific Coast, exclu- 
sive of California, 1885, $79,854, 140; 1891, $203,934,200. 

74. " An Argument Against the Prohibition of Fire Underwriters' Associations," read 
before the Senate Committee on Corporations (California) by C. F. Mullins, February 5, 
1889, pp. 8-10. 

75. Ratio of loss in California to amount written: 1880-85, fifty-five cents; 1886-91, 
seventy-four cents. Average rate in California : 1880-85, 1.47 per cent ; 1886-91, 1.72 per 
per cent. 

76. Fire Underwriters' Association of the Pacific, Proceedings, 1887, p. 69. 



68 SIXTEENTH ANNUAL MEETING OF THE 

anything unless liability and classes of hazards remain unchanged. For 
the rest of the Pacific Coast it appears that the average ratio of loss to 
amount written in the two periods of six years showed an advance of 
only twenty-five per cent, 77 notwithstanding the losses in Washington 
conflagrations are included, which raised the burning ratio of 1889 to 
$3.80 per one hundred dollars, a figure without precedent in insurance 
history. It needs no further argument to prove that a readjustment of 
rates will be necessary w T ithin a very few years. 

The unprofitableness of business in the Bast in recent years has kept 
the surplus reserves from advancing. Of 116 companies reporting to the 
New York department all but twenty-nine exhibit a combined ratio of 
loss and expense for 1891 of over one hundred per cent. As insurance 
laws require that neither capital nor reinsurance reserve shall be used 
for payment of losses, it appears that the surplus available for any con- 
flagration, held by companies doing business in New York, is only about 
$50,000,000, which is less than the Boston, and about half the Chicago, 
losses. Yet the conflagration hazard has increased enormously in the 
United States since those fires. We should hereafter lay up enough to 
provide for our own heavy losses when they come. During the six years 
of Union work, Coast premiums have amounted to $61,574,587 

Fire losses paid, 48.8 per cent . $30,057,539 

Expenses, 37.5 per cent 23,090,477 

Unearned premiums (one-half of six years' 

increase) 2,634,346 

Four per cent for underwriting profit due 
upon capital 2,462,980 58,245,352 

Surplus, 5.4 per cent $3,329,245 

Surely no one will contend that an average addition to surplus from 
this Coast of $560,000 per annum is too much in the face of liability 
advancing at the rate of $40,000,000 yearly. It may be objected that the 
charge of four per cent for risk of capital is out of date, but it is well to 
remember the stockholders occasionally in the department of statistics. 

Insurance cost may be ascertained in one of three ways : 1. By com- 
bining the experience of companies as recorded in their private classifi- 
cations ; 2. By governmental inquiry through the State departments or 
special bureaus ; 3. By concurrent classification of the business of all 
companies in one office. 

For over seventy years companies have combined experiences to a 
limited extent, a few at a time, or upon a few hazards. Careful research 

77. Average ratio of loss to amount written on Pacific Coast, exclusive of California : 
1S80-85, $1.16; 1886-91, $1.46. The amount written on the Coast outside of California io 
1889 was reported by the Coast Review to be $144,006,222; and the loss sustained in the 
same territory was $5,454,085, representing a burning ratio of 93.80 per Si 00. 



FIRK UNDERWRITERS' ASSOCIATION. 69 

has discovered less than ten tables of experience in print, all valueless 
now, except to show that the result on favored classes was often dis- 
appointing. In 1856 the Home of New York and two other companies 
agreed to conduct their classifications in accord ; but the experiment 
was soon abandoned as impracticable owing to differences of opinion. 
When Griswold's system was first published the Monitor succeeded in 
arranging with fourteen companies to use it and furnish their classifi- 
cations to a central bureau for private comparison of results ; but noth- 
ing has been heard of this for many years. The National Board Com- 
mittee of Statistics made the most determined effort on record to secure 
combined experiences, and in one year obtained results of 303 classes. 
But only a few companies provided them with full transcripts, and the 
work ceased for lack of appropriations. On the Pacific Coast the first 
tariff was based on the experience of three companies, 78 and few changes 
in the printed rates seem to have been made in twenty years. Not only 
is a combined experience impracticable here, since each company pre- 
scribes the classes and divisions for its business, but Mr. Belden stated 
in his paper recommending uniformity that few companies keep classi- 
fications, and he thought none keep sectional statistics.™ Mr. Geo. W. 
Dornin found that most offices include their San Francisco with all 
other Coast business. 80 

Classification by the State is not a new idea. The early commissioners 
recognized the importance of ascertaining the true fire cost, and often 
criticised the National Board for neglecting it. The Illinois insurance 
law of 1869 required the auditor to establish a classification bureau, to 
which companies should be compelled to report yearly. Shortly before 
the Chicago fire the auditor prescribed eighty-five classes, but never 
received reports. The Massachusetts department induced a number of 
companies to file transcripts of their experience, but they were prin- 
cipally furnished by mutuals. 81 That State classification bureaus have 
not yet been put in operation is no criterion for the future. Legisla- 
tures are very uncertain ; and with proposals to limit rates in one State 
to not exceeding $1.70 per annum, to form a board of insurance in 
another composed of three State officers, whose verdict as to the reason- 
ableness of rates should be final, and in Iowa last mouth to prohibit 
general agents from representing more than one company, the domain 
of legislative speculation is becoming extensive. Yet the Spectator 
would have more,— witness its editorial of October 15th : " In our judg- 
ment there is only one efficient remedy by which the underwriter may 



78. In 1872 a new tariff was prepared by seven prominent Coast underwriters, which was 
the foundation for the present tariff. 

79. Fire Underwriters' Association of the Pacific, Proceedings, 1886, p. 95. 

80. Fire Underwriters' Association of the Pacific, Proceedings, 1885, p. 92. 

81. Massachusetts Commissioners' Report, 1862: " The doctrine of chances." 

F. U. A. 5. 



70 SIXTEENTH ANNUAL MEETING OF THE 

be forearmed against assaults upon the rates, or measures to enforce 
compulsory rates 'by legislative enactments. It is by a system of com- 
pulsory classification ordered by the various State insurance departments 
in agreement with the companies." 

Have laws done so much for us that we should sue for more ? They 
have required of us paid-up capitals, restricted the investment of our 
assets, invented a reinsurance reserve, prescribed the form of our con- 
tract, construed it in the interest of the assured, and last of all they 
would now deny us the right to assemble peaceably, compare experiences 
and do business upon a common basis. If we ask the State to ascertain 
the cost of insurance, the State will also fix the selling price without 
waiting to be asked. Surely our own mental condition is not so impover- 
ished that we are no longer competent for ourselves to determine the one 
and regulate the other accordingly. 

To be accurate, permanently valuable, and gathered at least expense, 
statistics of Pacific Coast business should be recorded in the three stamp- 
ing offices of the Pacific Insurance Union. The books in use now register 
the location, amount, premium and term of every risk written, but the 
records are of little value. The desired object could be attained by 
using another column for classifying risks. Men as expert as our exami- 
ners should be could determine after a week's training the proper class 
of nine out of ten risks while glancing over the form of the daily report. 
To save work, reinsurance risks, premiums and losses should be omitted 
entirely. As the result of business of any one office cannot be com- 
municated to others, the records should be kept in ledgers corresponding 
to different portions of the field without reference to companies, say No. i 
for San Francisco, No. 2 for Los Angeles, Portland and other towns 
under rate book No. 2, and so on. If preferred, the general divisions of 
the field could be made to correspond with assessment districts A, B 
and C. In other words, the investigation should be based upon averages 
affecting all the business of all the companies, leaving the superior 
excellence of lines or methods in any one office to show in its own books 
but not in the aggregated transactions. It is assumed that losses now 
reported so generally to the Coast Review would be invariably furnished 
for the confidential use of the statistical department. No argument 
should be necessary to demonstrate the superiority of such a record over 
the experience of any one or even a dozen of the largest offices. In two 
years the risks and premiums thus classified would equal the Coast 
figures of the Firemans Fund for forty years. In five years the totals 
would outrank the business of the largest ten companies (in the order of 
premium receipts) for about seventeen years. Moreover, if the business 
outside of California is to increase at such a rate as 150 per cent in six 
years, we cannot accept the experience of a few companies spread over 
three times that period as a safe guide ; while it would be entirely 



FIRK UNDERWRITERS' ASSOCIATION. 71 

feasible if we possessed a complete record to use but five years at a time 
for ordinary classes, dropping the first year as soon as the sixth is 
recorded. The method of classifying is of less importance than the 
proposition itself. If adopted it is possible to provide for proper consid- 
eration of the exposure hazard, usually the bugbear of a student of loss 
statistics. While such a department could undertake any line of inquiry 
directed by the executive committee it would be wiser to begin the work 
in the simplest form consistent with scientific treatment of it, and after 
training a few reliable men add to their researches from year to year. 
One copy of the completed results could be furnished annually to the 
principal representatives of companies on the Coast, the basis rates 
revised not oftener than once in five years, and the statisticians in the 
classification department trained to notify the General Manager at once 
of any notable variation in premiums or losses of particular classes, that 
the companies might be warned. We have heard the comment long 
enough that rates are made by boys traveling around the country ; and 
while they need no defense it is our own fault if they are not furnished 
with statistics to support their ratings. In the Pacific Northwest the 
surveying and rating service is most intelligent. What others know 
generally the Union surveyors must study to the minutest detail, and 
the representatives of companies have neither time nor opportunity to 
emulate them. The time will probably come when we shall as soon 
think of asking a Union surveyor to adjust a loss as to call upon a 
special agent to rate a town. Our offices are flooded with correction 
slips and new ratings, compared with which complaints of unfairness or 
incorrect rating are insignificant in number. 

It is out of the question to even name the advocates of such a system as 
is now urged. State reports, insurance journals and association addresses 
during thirty-five years have constantly referred to it as the only means 
of putting our business upon a firm, safe and permanent basis. 82 It had 
the support of leading underwriters in National Board days. If there 
were some who opposed a combination of experiences, lessons learned 
since have worked many changes ; and they confess with bitter dis- 
appointment that the intelligence of individual underwriting is largely 
nullified by greed for business among their trusted officers, and the 
pressure of reckless competition upon their best agents. One man can do 
only one man's work ; and even the strong voices of the most eminent 
men in the profession are drowned by the roar of the multitude who 
make up the rank and file. 

The objections to commingling the experience of companies are four 
in number: First. That the experience of a company has cost it some- 
thing, is its only means of managing its business so as to make a profit, 



82. It is impracticable to give the references in detail for want of space. 



72 SIXTEENTH ANNUAL MEETING OF THE 

and that it cannot afford to give it away. In answer, a company will 
receive much more than it gives if it be made acquainted at the end of 
the year with the true results of Coast business as though written for 
one company through one office ; and its own experience is needed even 
more than formerly in the matter of lines, as no company can alter rates 
to correspond with its own limited knowledge. Second. That the public 
and ill-informed companies will learn which are profitable classes, the 
one demand reduction of rates and the other make a special fight for the 
business. Per contra, both will learn which are unprofitable classes, will 
cease their efforts to break down rates thereon, or set about improving 
them forthwith to avoid an expected increase. Not a few underwriters 
claim that the general impression as to which are profitable classes may 
suffer a rude shock some day ; but we have tried the plan of secrecy long 
enough, and these very underwriters have made a lamentable failure in 
trying to return handsome dividends to stockholders or make additions 
to surplus from the underwriting account in the United States. Third. 
That all that is necessary is to make an average profit from an average 
rate without bothering about the classes. It is not worth while discuss- 
ing this since the average rate is changing every day. Fourth. That the 
suggestions, as Mr. Geo. F. Grant once remarked, are "like the planting 
of trees : the next generation will have the benefit of the shade of the 
trees, and the next generation will have the benefit of these figures." 
The objection may apply to the business of a small office which requires 
twenty years to write one million dollars in premiums ; but knowledge 
at the end of one year of the number of manufacturing and milling risks 
written on the Coast, w r ith the average rate and income thereon, regard- 
less of the question of loss, would be of immediate value in considering 
allowances to be made for proposed automatic-sprinkler or other protec- 
tion. Mutual competition, when we have to meet it, will begin with 
detached risks ; and it is of prime importance to take account of stock 
where they are concerned. 

From all the good advice given us by our seniors, three paragraphs have 
been selected at intervals of twenty years to close this appeal. At the cen- 
tennial of the Philadelphia Contributionship the address was delivered 
by Hon. Horace Binney, the foremost lawyer of the Philadelphia bar : 

11 If rates are established by a company on the information derived 
from its own insurances, and nothing better, it strikes me as being 
much the same in point of certainty as if a man should insure lives 
without a mortality table, upon the strength of what he had observed 
among his own acquaintances. Cannot the companies come to the 
knowledge of such facts as will furnish a defensible reason for naming a 
certain premium? It is the opinion of scientific men, I believe, that by 
observing the course of events extensively and accurately such knowl- 
edge may be acquired and with it a rule of insurance. Is there any 



FIRE UNDERWRITERS' ASSOCIATION. 73 

doubt that the observations can be made ? There is none whatever ; 
and it cannot demand an expenditure which the united companies can- 
not both conveniently and profitably afford. Is there any doubt that a 
close approximation to a true rule for the future may be so obtained ? 
Upon the authority of wiser persons I believe there is none."" 3 

In 1872 the President of the Scottish National Insurance Company 
delivered an address which was considered by Walford to be the most 
complete treatise upon fire insurance then known : 

"The combination we are considering has another effect which is also 
to the advantage of the public. It serves to distribute the burden of 
losses fairly. If it is a just thing that cotton spinners should bear all 
the losses that arise in cotton mills, and not leave them to be borne by 
the owners of private dwelling-houses, or vice versa, it is well that the 
loss by each class of risks should be measured fairly. But the experi- 
ence of any one office, even the oldest and largest, taken by. itself, 
furnishes a very imperfect criterion ; and it is for the general advantage 
that the cost of insurance should be altered as regards any class of risks 
only when there is an overwhelming concurrence of experience as to 
the justice or necessity of the alteration.' ' S4 

As this paper was nearing completion the retiring President of the New 
England Insurance Exchange delivered the customary annual address. 
Mr. Crosby's name will be sufficient to fasten your attention upon his 
remarks in connection with the re-adjustment of rates and hazards: 

"There are classes of hazards costing us many times the premiums 
collected, and others on which the profit is excessive. The result is 
dissatisfaction all along the line, and frequent encroachment into our 
profitable classes by mutuals and other forms of insurance. If we 
should make an adjustment of rates on the basis of cost, we would 
largely remove the motive for the present aggressive form of competi- 
tion. What we want is more science and less gambling in consideration 
and making of rates. " S5 

It is unfortunate that th's paper could not have been reinforced by 
personal influence of a better known advocate. Others have tried for 
this end before and failed ; yet it is sure to come, and ought not to be 
delayed another month. The last words cannot be better said than by 
John Ruskin : 

11 I believe the quiet admission wh"ch we are all of us so ready to make, 
that because things have long been wrong it is impossible they should 
ever be right, is one of the most fatal sources of misery from which this 

83. Centennial meeting of the Philadelphia Contributionship for the insurance of houses 
from loss by fire, April 12, 1852. Report, pp. 55-5$. The entire address covers sixty -three 
pages. 

84. Walford's " Cyclopedia of Insurance," Vol., Ill, p. 532. 

85. Ninth Annual Report of the New England Insurance Exchange, p. 8 et seq. 



74 SIXTEENTH ANNUAL MEETING OF THE 

world suffers. Whenever you hear a man dissuading. you from attempt- 
ing to do well, on the ground that perfection is Utopian, beware of that 
man. Cast the word out of y our dictionary altogether. Things are either 
possible or impossible. You can easily determine which, in any given 
state of science. If the thing is impossible you need not trouble yourself 
about it ; if possible, try for it. The utopianism is not our business, — the 

workls " HERBERT FOLGER. 

Portland, February 13, 1892. 

(Applause.) 

Mr. H. M. Grant — It seems to me, Mr. President, that 
we owe a great deal to Mr. Folger for that paper. It is 
ably written and on an interesting subject. It has in- 
volved a great deal of research, such as few of us would 
undertake ; and the result is that it is presented in a 
form that makes it valuable for every one's reference 
and convenience, and I think that Ave should extend to 
Mr. Folger the thanks of the association ; and, further 
than that, I understand that there are more sheets to the 
paper which were not read; and I would make the motion 
that he be requested to furnish the balance of the paper so 
that it may be printed with the minutes of the association. 

Mr. Dornin — I would like to go further than that. 
There are few papers read before this association to which 
I have listened with greater interest and profit than to 
this of Mr. Folger. I think that it should go beyond this 
association, and would like to offer as an amendment to 
Mr. Grant's motion that a sufficient number of copies 
be furnished, in print of course, to be placed in the hands 
of every agent reporting to the Pacific Insurance Union. 
There is meat in it all the way through. 

The President — Every agent ? 

Mr. Kinne — I would like to ask how many agents 
there are, — about six thousand. 



FIRE UNDERWRITERS' ASSOCIATION. 75 

Mr. Dornin — If they will pay the bill. I believe that 
the educational principles should extend to the agents as 
well as to outsiders. Some of us have got beyond the 
educational point : we know it all, we think. And yet 
once in a while there is opportunity for improvement ; 
there is no doubt that the agents would enjoy the in- 
formation given, and in that way it conduces to our 
benefit and to the benefit of the companies represented ; 
and if there is afty plan through which the Pacific 
Insurance Union, who are usually "flush," can place 
this paper in the hands of the agent, I believe we will 
all gain by it. 

The President — When set up in the shape that it will be 
when our annual proceedings are printed, it will be very 
easy for the Pacific Insurance Union to obtain extra cop- 
ies, but the condition of the funds of this association and 
the prospect for the present year are such that we could not 
possibly afford to place these papers in the hands of every 
agent on the Coast, much as I think it should be done. 

Mr. Dornin — It was not my intention to do so. I had 
gotten the two papers mixed up in my mind. 

The President — Then Mr. Grant's motion that a vote 
of thanks be tendered to Mr. Folger for his admirable 
paper, and that he be requested to supply the missing 
sheets, and that they be included in the minutes of the 
proceedings, is before the association. Are you ready for 
the question? All in favor of that will signify the same 
in the usual manner. Carried unanimously. 

Mr. Carpenter— Will these diagrams which Mr. Folger 
has furnished be included in the report as published ? 

Mr. President— They will be reproduced. That can 
be done at a very slight expense. 



76 SIXTEENTH ANNUAL MEETING OF THE 

The next contribution on the programme is entitled, 
The Benefits of Fire Insurance as a Collateral, by our old 
friend Mr. Sexton. 

Mr. Sexton — Mr. President and Gentlemen: This old 
remark of our President I have been hearing for forty or 
fifty years ; so it is not new to me, — about the old friend ; 
and this calls to my mind that it is a new subject, and 
when I get througli with it it will call to your mind that 
it is new, that is, the benefits of fire insurance as a col- 
lateral. It has not been talked of much before, and I 
regret very much that some one else did not tackle it. 
In the first place the facts have to be manufactured, and 
the figures to be guessed at; and, if somebody will lock the 
door and keep people from going out, Ave will commence. 
It is a miserably dry subject, I can tell you that. 

THE BENEFITS OF FIRE INSURANCE AS COLLATERAL. 

Much is said and written of the benefits of fire insurance as indemnity, 
but we seldom refer to the benefits of fire insurance as collateral. 

From the insurance reports for 1891 we find that policies aggregating 
$12,500,000,000 were issued on property during that year; or in other 
words fire insurance companies issued that amount of paper as collateral 
to capitalists, merchants and property holders. This $12,500,000,000 
was issued primarily on its value as indemnity ; and, in making rates of 
premium, losses, expenses and a hoped-for profit were the only fac- 
tors considered. 

Underwriters as rate-makers do not take into consideration the bene- 
fits to the assured of fire insurance as collateral, and never think of 
placing a small percentage of the value of that benefit into the rate, and 
getting some pay for the use of the capital as collateral, as well as for 
indemnity. 

This collateral phase of fire insurance has not been heretofore talked 
of in our meetings ; and were it not for that so-called nuisance on 
this earth, the "Oracle," Mr. President Lowden's polite command to 
write up something new would not have resulted in having this dry 
subject inflicted on you. The " Oracle," a descendant of a good family, 
has more education than knowledge, more knowledge than ability, 
and more ability than force. He came to the Coast in '49 or the early 
'50's, dealt monte, tended bar, acted as chambermaid in hotels, 



FIRE UNDERWRITERS' ASSOCIATION. 77 

nailed the blankets to the bunks to keep them? (didn't mine), wasn't 
raised to rough work, was a member of the legislature before the war, 
didn't have energy enough to emigrate from his county when his term 
expired, didn't learn until too late that statesmanship in California is 
not appreciated, can talk constitutional law, tariff reform, greenback 
money, free coinage, free drinks, and the heathen Chinee, but has a 
hard time to make financial ends meet, and keep his credit good at the 
hotel, store and Chinese wash-house. 

He is an " Oracle," however, and in the city is known by his crooked 
cane, shiny hat and tobacco-stained shirt front ; in the country his 
uniform is slouch hat and shirtsleeves. He is anti-railroad, anti- 
monopoly, and delights to tell of the good old days when an apple was 
worth a dollar. He is numerous on Pine street, and in the city and 
country hotel sitting-room. He is getting scarce, and in a few short 
years his voice will cease in the land. He is mostly a bachelor : the 
exception is when he marries his landlady and serves as a hotel sign. 
If he were mostly married he would cease to be an " Oracle. " He would 
soon learn that he did not know it all. Well, by this time you ask, 
What has all this stuff to do with The Benefits of Fire Insurance as Col- 
lateral? Not much, directly, but on my travels many ideas bearing on 
this subject were picked up, and in nearly all cases were brought out 
from people not underwriters (by the "Oracle "), a few of which I put 
in this paper. 

As I was sitting near the barroom stove in a small California town 
one winter evening, the "Oracle," having learned that an insurance 
agent was present, commenced to speak his piece against monopolies 
generally and insurance companies particularly, and was using me up 
in good style, showing how much money we took in, and how little we 
paid out, in that town, when a carpenter came to my rescue and told his 
story : l 

THE CARPENTER'S STORY OF INSURANCE AS COLLATERAL. 

U I came to town three years ago with my wife, baby and a chest of 
tools. I rented a four-room dwelling at twelve dollars per month, and 
laid up three hundred dollars the first two years. With this I bought 
a lot, and, wishing to build a small house, went to Deacon Jones, who 
loaned money on mortgages, but he would only lend me two hundred 
dollars on the lot at ten per cent. I wanted four hundred. The Deacon 
said that if I would furnish an endorser he would let me have four hun- 
dred. I saw a notice on an insurance agent's bulletin board, ' Money 
to loan.' I was suspicious of insurance and real estate agents, as I was 
convinced from hearsay that they were sharpers. My wife, however, 
asked me to see the agent, but to be very careful ; and so I called and 
told him what I wanted. The agent said he would lend me four hun- 
dred dollars at nine per cent to put up a dwelling, and that he would 



78 SIXTEENTH ANNUM, MEETING OF THE 

take the dwelling and lot as security. I informed him that I had been 
to see Deacon Jones about obtaining a loan, but that he wanted an 
endorser. The agent said he w 7 ould insure the dwelling for three hun- 
dred dollars and the contents for two hundred, and hold the policy as 
collateral. He further stated that he didn't want any endorser, and that 
if the place burned down the insurance would pay the debt and leave a 
balance beside. 

"Cost of insurance? He said five hundred dollars for three years 
would be six dollars, — two dollars per year. This looked so slick 
that I thought it w T as bunco, but he put it dowm on paper for me to 
take home. 

11 Interest on $400 at nine per cent, three years .... $108.00 
11 Insurance, $500 at $1.20, three years 6.00 



Total $114.00 

" Deacon Jones wanted ten per cent, being $120 for same sum and time, 
with a friend to endorse for me ; but this insurance as collateral saves 
six dollars in three years, and also secures me for $500 if my property is 
destroyed by fire. So you see I am ahead of the insurance companies if 
I never have a fire. ' ' 

This closed the " Oracle," but nothing short of his firm belief in capi- 
tal being able to protect itself prevented him from calling a public 
meeting to petition the legislature to pass a law T to protect money 
loaners from being imposed on by accepting as collateral the insurance 
policy of any company that w r ould insure a wooden building for $500 for 
three years for six dollars. 

THE DRUMMER'S IDEA OF INSURANCE AS COLLATERAL. 

At a small hotel in an out-of-the-way Oregon town, passing the even- 
ing in the sitting room (no bar), met the "Oracle;" this time he was 
the landlord, had married the widow who owned the hotel, and there 
being no bar he was sober and agreeable. As usual fire insurance took 
the lead in the evening's entertainment, and as usual the " Oracle" w T as 
"agin it ;" didn't believe in sending money out of the country and get- 
ting no return for it ; had not had a fire in that towm since the flour mill 
burned, and that was burned to get the insurance ; but it served the com- 
panies right to make them pay. He w r as on the jury, and the jury did 
not consider any technicalities ; it was proved that the owner paid $500 
for $10,000 insurance, and, as the companies did not rebuild the mill, 
they should pay the insurance that they took the man's money for. In 
reply to a question as to estimate of the value of the property at time of 
fire, and questions of ownership, if any, submitted to the jury, he said, 
"Yes ; there was a bushel basket full of papers submitted to the jury, 
but not looked at, because the foreman said they were all technicalities 



FIRE UNDERWRITERS' ASSOCIATION. 79 

to prevent capital from coming into the country, and should not be 
considered by honest men. We gave a verdict for $10,000 and costs." 

He then named the old settlers who did not insuie, among others the 
firm of Ox Team & Co., who brought their first stock across the 
plains from St. Joe, Missouri, and never had a fire. Also referred to the 
new firm of Cash & Co., who paid seven per cent for insurance, as not 
good business men. 

When the "Oracle" ran down, an active Chicago drummer had his 
say, and asked the " Oracle " how much insurance Cash & Co. carried. 
" Oracle " said, "$5,000 at seven per cent, premium $350; but Ox Team 
& Co. built a brick store and saved that $350." Drummer said, "Did 
they save it? That brick store cost $3,500. Cash & Co' s frame store, 
same size, cost $1,000. This leaves Cash & Co. $2,500 coin to keep in 
their business, worth to them or any other merchant here 18 per cent 
per annum to discount bills with; that is $450 saved by them. The 
brick building is wearing out at the rate of two per cent per annum, and 
the taxes and repairs are say two per cent more; that is four per cent on 
that $2,500, — another $100 saved for Cash & Co., in all $550. And they 
pay $350 for insurance. Ox Team & Co. save that $350, but they have 
no insurance, and as they keep oils, paints and matches it is possible 
that a fire might occur in their brick store. 

" This is not all. Cash & Co., by this showing, save $200 a year; but 
they also have the benefit of fire insurance as collateral for $5,000, while 
Ox Team & Co. have none, and in case of a fire in their brick store 
would have no cash to settle with. Yes, they have cattle and lands, but 
cash counts; and for this reason Cash & Co. have better credit, and can 
buy a shade closer than Ox Team & Co., as an insurance policy in a 
standard company is best collateral for a merchant to have. It means 
cash in 60 days, or less, while lands and cattle must wait for a market. 
We sell for cash, — 60 days, and must know that our customer has col- 
lateral. Do not Cash & Co. sell a shade less than Ox Team & Co.?" "Oh! 
well, " " Oracle ' ' said, ' ' My wife says we can do better by buying for cash 
from Cash & Co. ; but for my part I never did care to pinch a nickel, 
and when I buy on time I trade at the other store." 

THE WHEAT BUYER'S STORY. 

Trying to gather in a line of warehouse insurance on grain for a large 
milling and wheat dealing firm in the country, the "Oracle" again 
turned up, and in the usual flippant style with which people who know 
least about a subject are most ready to give opinions, and the less they 
know the more positive are their decisions, gave us his views on the 
imprudence of paying out money for insurance when they had no fires. 
He spoke his piece. You have all heard it often ; and when he finished 
the wheat dealer told his side of the story, showing the benefit of fire 
insurance as collateral, and as near as I recollect about thus : 



80 SIXTEENTH ANNUAL MEETING OF THE 

" Our firm has $500,000 invested in mills and warehouses and stock of 
flour and grain. We insure our mills and warehouses and stock that we 
may have a permanent income from our capital, and by having this 
insurance as collateral for our investment we can be content with 
smaller dividends. We take no chances. We also need from $500,000 
to $1,000,000 extra capital during the wheat season to loan to our cus- 
tomers on wheat stored in our warehouses, which we procure and loan 
at seven per cent, taking warehouse receipts and insurance policies as 
collateral, which we in turn deposit with our bankers. Yes, the insur- 
ance costs one and a quarter per cent, making interest and insurance 
eight and a quarter per cent. 

1 ' With this collateral farmers can hire money at much less rate than 
on what was supposed to be best security in existence, — farm mortgages. 
Interest on mortgages is not less than nine per cent, with one per cent 
commission, and cost of securing loan, and must be for one or more 
years, while wheat loans can be paid at any time. The difference in 
interest paid by farmers on $1,000,000 on wheat loans, including cost of 
insurance, — total eight and a quarter per cent, — and on farm property at 
ten per cent, including commission, is $17,500, and is (clean profit) the 
benefit of fire insurance as collateral on that amount of loans. 

" Insurance pays a profit as collateral endorser for wheat raisers ; in fact 
without fire insurance few loans would be made on wheat in our frame 
warehouses, thermometer 112 in the shade, tramps and freight trains 
thrown in, at any ordinary rate of interest, certainly not as low as on 
mortgage on lands. We would not loan at twelve per cent. Yes, the 
companies are big, rich and make money. If they were not big and 
rich, and did not make money, their insurance policies attached to a 
warehouse receipt would not be as good as bullion for collateral." 

THE BANKER'S STORY. 

On an overland trip I met an "Oracle " in the smoking-room, and as 
the insurance agent had to talk insurance he was pounced on by the 
" Oracle ;" and here let me say that the " Oracle " can be made useful 
"as a telephone," through which the benefits of insurance as collateral, 
as indemnity, and as security can be conveyed to others, who listen much 
and talk little; and it pays to carefully explain in a crowd the policy 
forms and instructions, when nothing else to do, to a fellow who don't 
know an insurance policy from the Declaration of Independence, and 
to particularly point out the good features of our company, and the good 
qualities of our agent. Following this idea, and doing best possible for 
the insurance side of the question, the interest of a quiet man in the 
corner, a banker, was awakened ; and he took part in the confab, and 
was ready at every point to show to the " Oracle " and the audience that 
fire insurance was not an evil because, as stated by the " Oracle," a large 
percentage of fires were caused by over-insurance. 



FIRE UNDERWRITERS' ASSOCIATION. 81 

" That this is not true is proven, as, where fire marshals have kept 
proper records of causes of fires, a very small percentage of the causes 
were unaccounted for, and that all unaccounted-for causes were from 
over-insurance is a popular error. 

"That the expense of thirty-five per cent is not too high, as this enor- 
mous collateral is built up from small premiums gathered in from large 
districts, and cannot with safety be taken from large values in small 
areas. That companies from other States and countries were taking our 
money away without any return is not correct, as they furnish collateral 
that cannot be had at home. 

"That mutual companies should be organized and patronized puts a 
man in the position of being collateral security for his own paper, prin- 
cipal and endorser; and the fact that such companies require no capital is 
sufficient evidence of their want of value as collateral ; and, as to expenses 
of management, the records show that with the exception of the few larger 
mutuals that the expenses in excess of commissions paid are much larger 
in mutual than in stock companies, there being no one to watch the 
expense account." 

Banker also said that he did not own any insurance stock ; had no use 
for insurance except for collateral on loans and on property invest- 
ments, and wanted the best, and as to rates the reports showed that 
they were none too high, but he like all other men had a grievance, and 
that was that his insurance collateral on loans was liable to be weakened 
by the borrower taking other insurance, not payable to the bank, 
which on contribution in loss would reduce the amount due on the poli- 
cies held as collateral. Did not know of a remedy for this, but if one 
were found the benefit of insurance as collateral would be very much 
increased. The " Oracle " woke up the wrong passenger that time. 

THE PROPERTY HOLDER'S STORY AND GROWL. 

One Sunday forenoon, in a twenty per cent town, in a crowd looking 
at a new brick building in course of construction and talking insurance 
to the owner, the "Oracle " was there and wanted to know why any one 
would pay for insurance on a fireproof brick building ; the "fireproof" 
building referred to was a forest of pine and redwood joists, beams, stud, 
ding and rafters, surrounded by a wall partly of brick, but largely o- 
door and window openings cased with wood, wooden cornice, roof 
covered with tin, — a real combustible fireproof. 

The owner, who had made money in trade, was getting his affairs 
in readiness to retire from active work to visit the old world, and as he 
expressed it to take some comfort (getting seasick, eh ! ) ; said that he 
had been seeking some permanent investment that would bring him a 
reasonable and sure return, and concluded to put his funds in brick and 
mortar ; that he had leased the building for a term of years for a sum 



82 SIXTEENTH ANNUAL MEETING OF THE 

that would pay taxes, repairs, wear and tear and insurance, and net six 
percent; that insurance, though not needed on his "fireproof" build- 
ing, was to him a collateral security on his investment and made it safer ; 
that at his age he could not take any risks, and intended to insure for 
enough to replace the building ; would also insure his rents ; could then 
go to Europe or go dead and his family would be provided for. 

Some months later he, this property owner, called at our office and 
said that he was about to start on his tour of Europe, that he read over 
his insurance policy to see if it was all straight, and made the discovery 
that gunpowder, phosphorus, nitro-glycerine, naphtha, gasoline, benzine, 
and a whole lot of other articles, if brought onto the premises, would 
void the policy. Explained to him that this clause applied to acts of 
assured only, and pointed out to him the words, "or if the assured shall 
keep," and that any of this forbidden property brought onto the prem- 
ises by others than the assured, or his duly authorized agent, would not 
void the policy, and to assure him that this is the law of the polic}- and 
the intent of the contract. Wrote on the face of the policy, "Unauthor- 
ized acts of tenants will not void this policy. " He went away happy, but 
"the best laid schemes o' mice an' men gang aft aglee." The compact 
refused to concur in the law of the contract. Fact is, " that the born and 
bred underwriters" seem to have a positive dislike to anything that can- 
not be read two ways, one way to suit the assured when taking a policy 
and the other way to suit the adjuster when settling a loss. A suggestion 
that the endorsement be amended to read, "Acts of tenants will not 
void this policy" was of course rejected. Another one, "Unauthorized 
acts of tenants will void this policy," met with same fate, and rny friend 
is waiting, — dare not leave, — must watch his building and his tenants, 
and cannot go to Europe until our rate-makers fix a rate of premium that 
will permit a form of policy that will secure to him The Benefits of 
Fire Insurance as Collateral. 

Now, Mr. President and gentlemen, these few homely illustrations of 
The Benefits of Fire Insurance as Collateral are quoted to show that with 
all classes, from the owner of the little home, who is struggling to make 
and maintain shelter for his family, to the multi-millionaire who appar- 
ently controls the financial destinies of the nation, fire insurance is abso- 
lutely necessary as collateral ; and I do not hesitate to assert that the 
$130,000,000 estimated paid in 1891 for premiums on the $12,500,000,000 
covered, was saved to the community directly, and indirectly, in the 
decreased cost of funds hired, rents paid and purchases made by the 
holders of this collateral, and in conclusion can only say that a careful 
study of The Benefits of Fire Insurance as Collateral will enable the 
local agent to say to his fellow citizen, who may look upon him as a non- 
producer, that the funds that he gathers in are a part of, and help to 
make up, the enormous accumulation, which is the backing for the 



FIRE UNDERWRITERS' ASSOCIATION. 83 

collateral that enabled the house-owner to build or buy his home; the 
merchant to buy his stock, sixty days, at cash prices, and sell at a 
reduced rate to the consumers ; the wheat dealer to buy a million dollars 
worth of wheat with less than a hundred thousand capital, thus creating 
a competition that enables the wheat-raiser to command winter prices 
in the harvest season ; the banker to command best collateral, and 
as rates of interest decrease, as the security of the collateral offered 
increases, his clients to get best rates possible. 

Regretting, Mr. President, that this subject had not fallen to some 
able statistical member of this association, who could have conveyed to 
this association by columns of figures, as well as by columns in colors, 
the variations in trade, showing that, as fire insurance increases, interest 
decreases, as the collateral grows better, interest grows less, and that 
the total sum paid for premiums is more than saved to the community in 
reduced rate of interest on loans, and reduced profits demanded on 
investments, — this saving, being the benefits of fire insurance as col- 
lateral. 



(Applause.) 



WM. SEXTON. 



Mr. J. Scott Wilson — That man lived in San Jose, 
didn't he? 

Mr. Sexton — He is there yet. 

The President — Well, we have all met the oracle, but 
we have not been favored as Mr. Sexton has. However, 
this is a new feature. Something we have not talked 
about very much is the value of fire insurance as a 
collateral, and to the special agent in presenting the 
matter to the assured, and in conversation with the agent, 
the points made by Mr. Sexton are very valuable. 

Mr. Dornin — Mr. Sexton omitted from his illustration 
a very important case that occurred in Arizona several 
years ago, where the insurance policy secured the owner 
and the material man at a cost of twenty per cent. 

Mr. Sexton— It was worth what they paid. There was 
a case in Arizona. We represented a prominent Eastern 
company, and a man sold some lumber to a party to 



84 SIXTEENTH ANNUAL MEETING OF THE 

build a boarding-house to cost about $2,000 that would 
pay for itself in about two months. The business was 
run in one of those booming mining towns. The risk 
paid twenty per cent premium. Well, it looked like a 
great big sum, — $1,100 I think, at twenty per cent. It 
went to the home office, and I am satisfied the clerk at the 
home office passed it at two per cent, or they never would 
have passed the risk. However, it did not burn that 
year. The next year we took it for $750 at fifteen per 
cent, and it burned that year from a dwelling in the 
neighborhood, and he had the benefit of the collateral 
security and indemnity. 

The President — The cost of insurance is a difficult 
thing to arrive at under such circumstances. 

The next paper on the list is The Boiler Risk in Special 
Hazards, by Mr. J. D. Maxwell. 

THE BOILER RISK IN SPECIAL HAZARDS. 

I have had a serious ambition to write a paper ever since I have been 
a member of this association. I do not know exactly why, unless, per- 
haps, for the reason that our friend, the insurance editor, generally 
quotes more or less from all the papers. That is a duty he owes his 
subscribers. Then besides this a man feels his importance for a few 
minutes when he sees his writing and name in print. He can buy a 
whole lot of copies, mark them and send them Bast, even if what he 
says is of little or no value to his association. When you elected friend 
Lowden your president I supposed at the time it was in the nature of 
things. Now, however, I fully appreciate the wisdom of the selection. 
He invited me to write a paper, and I said yes at once for fear he might 
back out; and, agreeable to his request, my subject will concern the 
contents of the boiler-room in such a manner I trust as will facilitate the 
work some little in passing judgment upon the plant by the field men, 
the local agent and at the home office. 

I desire what I say to be received chiefly in the line of opinion. It is 
difficult for a fire underwriter to become very practical in this direction, 
and my knowledge on this subject is but superficial, resulting from con- 
siderable contact with the engineer and the boiler-room; and when I get 
through friend Kinne will please not get up here and wind me up with 



FIRE UNDERWRITERS' ASSOCIATION. 85 

some of those penetrating questions of his which so often compel a fellow 
to display his ignorance; and if he does I will simply tell him I know 
nothing about it. I look to the President for this protection. 

In order to obtain the information desired, and to intelligently judge 
the boiler-room from any standpoint, it is necessary to be in it. I believe 
the general agent or manager rarely is, and the local agent and the 
special go in only occasionally. Why they do not is difficult to say, but 
I venture some of the following reasons : We stand somewhat in awe 
of the engineer, not because he wears overalls and has dirty hands, nor 
for the reason that he glares at us and wishes we would go out and stay 
out, but because he knows more about it than we do, and we hesitate to 
fraternize a little with him for fear lie will observe it. That is all a 
mistake. To know a good engineer — there are good ones and bad ones — 
is to know a large-size fellow. It may require authority in order to be 
admitted, if so get it, if not go in without it. Tell him your business, 
and ask him all you wish to know, and he will give you civil answers. 
Then when you have finished make him aware of the fact that what you 
know about boilers and engines is theoretical and you prefer being 
practical, and he will assist you. 

SPECIAL HAZARD SURVEYS 

Present some questions touching upon the subject which are usually 
answered by the field men or local in guessing. " If smoke stack is 
built of brick, is it plastered inside and out?" " How high is it, 
and how far does it extend above the roof?" "Are the walls built 
double, and how thick are they ? " " Is it a horizontal tubular or return 
flue boiler?" "How thick are the walls inclosing it?" " How near 
is the woodwork in front, rear, sides or overhead ? '' All these questions 
but one are found upon the survey of a prominent New York company. 
Beginning at the stack, whether or not it is plastered inside or outside 
should rarely come into question at the present time as a cause of fire. 
If combustion is good in the boiler furnace the stack will remain cool; 
if combustion is bad it will sooner or later burn out, plastered or not. 
" How high is it, and how far does it extend above the roof? " The stack 
is usually if not invariably high enough for the purpose of good draught, 
without which there cannot be good comDustion; therefore the stack is 
sufficiently high to avoid the setting fire to its own buildings. We are 
all aware that a very slight atmospheric disturbance will carry sparks a 
great distance, hence while spark-catchers frequently prevent fires to 
contiguous property they rarely serve to protect the buildings directly 
underneath them. 

"Are the walls of the stack built double, and how thick are they ? " 
No one but the man who built it will answer this question without guess- 
ing. More important results than from the asking and answering of this 
F.U.A. 6. 



86 SIXTEENTH ANNUAL MEETING OF THE 

question may be obtained by observing the top of the stack. If there 
is much smoke coming out it is due to one of two causes : First, the engi- 
neer or fireman is now firing up, and the smoke will soon disappear; or, 
Second, the combustion is so bad that the heat from the coal so used 
is going into the stack. There should be two objections to this, one the 
extravagant use of fuel ; the other, and more serious to property owners 
and fire underwriters, is that the heat is burning the stack out to such a 
degree that double or single walls have little meaning, and sooner or 
later it will come down. 

1 * Is it a horizontal tubular or return flue boiler ? ' ' They are the same. 
Small tubes are tubes and large tubes are flues. When six inches or under 
they are tubes, and if over six inches in diameter they are flues. They 
extend from head to head and are securely welded or beaded, thus provid- 
ing additional strength to the heads, more commonly accepted and spoken 
of as braces, and are open at the end to admit heat from the furnace 
below, thereby economizing the use of fuel for the making of steam. 
There should at all times be sufficient water to cover the tubes. Boilers 
in most general use are the horizontal and the water tube, the particular 
make of which should not materially affect the fire hazard. 

"How thick are the walls inclosing it?" What a familiar question, 
and how variously is it answered. Some reply one foot thick, others 
two feet, and I have seen answers to this question as high as three to six 
feet. The foundation of a boiler should be very secure, but the thick- 
ness of the inclosure is but a question of retaining the heat. There are 
boiler coverings of various compositions of from one to three inches 
thick which answer quite as well as brick coverings of as many feet. 

"How near the woodwork does the boiler come to the roof overhead ?" 
This question would perhaps obtain better results, "Is there sufficient 
space for the engineer to move freely ahout his boiler in front, on the 
sides, in the rear and on top?" The latter position especially should 
receive serious attention on the part of underwriters. On top is usually 
found the manhole or access for internal examinations and repairs ; but 
more important than this is the safety valve which is also above. 
Through it the factor of safety or danger point is announced. The 
safety valve should be found working freely every day in the year ; and 
if there is not sufficient room for this fact to be easily ascertained it 
will be neglected. Where such a situation exists it might be well to 
know it, and to get off the risk and stay off until the assured raises the 
roof or lowers the boiler. 

Before passing from the above questions and replies, some of them 
might perhaps be eliminated entirely from both daily reports and special- 
hazard surveys, or transferred to the inspection slip. The special agent 
is the one upon whom should devolve the duty of obtaining from the 
boiler-room this information, and imparting it to his local agent and to 



FIRE UNDERWRITERS' ASSOCIATION. 87 

his home office. Work like this is not congenial to the local agent as 
a rule ; and to devote too much time to its prosecution disqualifies him 
to a large degree for his more pleasant and profitable vocation of getting 
business. 

There are many boiler appliances with which the field men may become 
more or less familiar, if desired. For instance, there is one called the 
high and low water alarm, or in other words a whistle which blows when 
the water is too low or too high. Only a few of them are in use, and 
there should be more. They cost little and might perhaps prevent the 
loss of life and destruction of property. Another important feature in 
the construction of boiler plants, and one which is too often overlooked, 
is the introduction of the wicket or air register in the furnace door, 
opening into a perforated iron lining inside. The resulting benefits 
from the wicket are : First. It obviates the necessity of opening the 
doors for draught, and permits the engineer to get much or little as he 
desires by regulating the wicket. The air is thus superheated while 
passing through the warm lining. Cold air retaids combustion, and 
injures the fire sheets of the boiler. Second. It is a combined protection 
to the furnace door, keeping it cool, thus preserving it from excessive 
heat and from burning out. 

The water gauge or upright glass tube does not always correctly reg- 
ister the quantity of water. The small pipe connecting the gauge with 
the boiler interior is frequently too small, and becomes filled or choked 
with sediment ; and .while the gauge may be full the boiler may be 
empty, and vice versa. The same may be said of the steam gauge, 
which is sometimes from five to fifty pounds out, as the case may be. 
If the gauge register fifty pounds more steam than is actually carried 
there maybe more fuel consumed than is necessary. In any event it is 
misleading ; and if the register is fifty pounds less steam than is car- 
ried it is very dangerous. 

Plants should all have heaters through which the water is pumped 
into the boiler. The heater is somewhat expensive, but not so much so 
as using cold water only. A boiler will wear longer with warm water, 
and heaters cost less to buy than boilers. Some places are poorly 
arranged, however, especially where connections are so arranged that 
the work is done backwards. For instance, water is sometimes first 
heated, and then passes through the pumps before reaching the boiler. 
This does not economize the use of fuel, and it wears out the pumps. 

Explosions of boilers, according to one eminent engineer, are due to 
defective material, natural deterioration, defects of construction, or to 
improper management and lack of water. According to another it 
requires an abundance of water to cause a serious explosion, depending 
largely upon the resisting power of the shell. The opinions of David 
Stark, who is Chief Inspector of Boilers on this Coast for the American 



88 SIXTEENTH ANNUAL MEETING OF THE 

Casualty Insurance & Security Company, which corporation I have the 
honor to represent as Associate General Agent, are, so far as I can see, 
regarded as authentic and reliable. He holds that large explosions 
require much water, and small separations come from little water, and 
are regarded more in the light of rupture or collapse. Mr. Stark has 
stated that experiments with little or no water have been made in Lon- 
don recently, of heating a boiler red hot to show that it would not cause 
an explosion ; and the tests were entirely successful, the promoters of 
which were sitting (protected of course) on top of the boiler during its 
progress. 

When an average size boiler is under steam with one hundred pounds 
registered, its full meaning is not conveyed. For illustration : The cir- 
cumference of a sixty-inch boiler is 188 inches; the length in inches of 
a sixteen-foot boiler is 192. The circumference multiplied by its length 
in inches gives a total of 36,191 square inches in shell. The total area 
of the heads of a sixty-inch boiler, after deducting the area of sixty 
three and one-half inch tubes from each head, leaves a total of 4,500 
square inches ; this added to the number of square inches of the shell 
gives a total of 40,691 ; and this multiplied by one hundred pounds 
pressure at every square inch of this surface gives a total in pounds of 
4,069,180, which equals 2,034 tons, and according to Professor Thurston 
contains enough energy stored within the boiler to project it one mile 
high. 

I wish to say a word where fire underwriters can be largely influential 
in elevating the general standard of the boiler-room : First. Ascertain 
whether or not the engineer belongs to one or the other society of 
stationary engineers. If he does the chances are that he is both qualified 
for the performance of his duties and is reliable. If he is not a member 
he may yet be a good man, but the chances are more largely in his favor 
if he is. This information should be had and recorded. Second. Is 
the boiler insured, and is it inspected by one or other of the boiler insur- 
ing and inspecting companies ? Government inspections are hydrostatic 
and injurious to boilers ; those obtained from inspection companies are 
internal hammer inspections, which are guaranteed by the amount of 
money represented in the face of the policy, therefore acceptable to 
steam users generally. 

Engineers are competent to do their own inspecting ; but when their 
boilers are emptied and the plant shut down their time is employed 
almost entirely upon the engine and machinery, and they also, as a rule, 
lack the inclination to go in. If they do go in, the eye and ear are not 
so sufficiently trained for the detection of an imperfection, nor the mind 
so quick to see the cause and suggest the remedy. Therefore it is some- 
what unfair to expect from him the same skill in turning a boiler inside 
out as from a professional inspector. 



FIRE UNDERWRITERS' ASSOCIATION. 89 

There are other matters pertaining to this subject, such as how to 
obtain the best combustion, the stand pipe, feed pipe, blow off, steam 
drum, mud drum and similar important connections, which time will 
not permit at present. 

Speaking of specials in this connection recalls an amusing incident 
which will do the young field men no harm, even if it does the older 
specials no good. While assisting at a boiler inspection some months 
ago, and I am free to confess that my part consisted principally in hold- 
ing the candle for lighting the inspector in and out of the manhole, a 
well-dressed, good-looking young special blew in, bringing sunshine 
along with him, and spoke something like this: "Nice day, I repre- 
sent the World's Fair Anglomaniac Fire Insurance Society, the largest 
in the world. Know our agent here ? No ? Well, he's a dandy, smokes 
elegant cigars. Have one? No? Don't smoke? All right, take one 
anyhow and give it to your boss ; he'll raise your wages. Good joke, 
see? Tata, old man, see you later." And then there was gloom and 
the engineer said, " He's crazy." 

J. D. MAXWELL. 

(Applause.) 

The President — Such practical information as this is 
what we need in our business, gentlemen. We feel grate- 
ful for it. 

Our next contribution is from Mr. Peter Outcalt, who 
is not with us this year. His paper, I think, is in the pos- 
session of Mr. H. M. Grant, if he will kindly read it. 

PROFESSIONAL ERRORS. 

Having during the fall and winter been rather over-weighted by a 
variety of important business engagements, it is not possible for me — 
in the short time between now and the date of the annual meeting— to 
offer a paper as elaborately bristling with statistics as would be the most 
agreeable to me, or as would to the mind of the average thinker be the 
most convincing style of argument. From the fact, however, that the 
propositions I design a reference to are more or less thoroughly familiar 
to our audience, and for the further reason that to commemorate the 
incumbency of a dear friend I am willing to risk the imputation of 
inappropriateness, I humbly offer what follows, hoping that in it some 
may see a point or two of interest, if not of instruction. 

In a variety of ways, as the year '91 progressed toward its close, the 
insurance journals of the day have indulged in their time-honored custom 
of holding up to the notice of the underwriting guild that the times were 



90 SIXTEENTH ANNUAL MEETING OF THE 

out of joint, that despite the most ingenious inventions associated with 
the march of architectural and constructive ideas, and with preventive and 
extiuguishing discovery, the loss ratios of the country still held their 
sway, as if in triumphant contradiction of man's ability to keep pace with 
the increasing hazards incident to the rapid forward movement of the 
times. Their columns have teemed with criticisms, protests, denuncia- 
tions and the like, aiming their shafts here and there at illiterate legisla- 
tive interference and other extraneous hindrances, but failing in any 
specially noteworthy way to condemn the purely inherent faults with 
whic h our business is to-day unhappilly too generally affected. 

That, in the short space allotted to an article such as this, remedial 
means and measures are possible of thorough and comprehensive demon- 
stration is a claim too extensive for any man to make, no matter what 
the breadth of his reading and experience may have been, or however 
clear may be his vision respecting economic questions, or the general 
trend of professional experiences. It may, however, be within his 
power to say something of interest, sometimes something in a sense 
novel ; and as out of such expressions it is perhaps not too much to say 
that our eventual emancipation from the thralldom of error is likely to 
come, and as no class of men identified with the profession of underwrit- 
ing should have larger power for good than is true of the field man, it is, 
as I view it, entirely in order that administrative questions be as freely 
dealt with in these annual reunions of he association as those which 
more closely and literally touch the every-day concerns of its members. 

In line with my belief in the propriety of this style of discussion, I may 
begin by saying that the conviction in my mind has been gaining in 
strength continually, that the nature and character of relief measures . 
were necessarily so radical, that their general adoption has been hindered 
from that cause alone. It is a somewhat hazardous role to assume, — 
that of a reformer of administrative fallacies ; and as even amongst the 
enlightened there is a strong disposition to consult executive comfort 
before other things, absurdities have grown apace, the future having 
been trusted to to solve the difficulties of the position, and to work the 
remedy. In this connection there is an inexcusable attitude of deference 
to the verdict of the illiterate majority persistently and senselessly 
maintained, with the result that the much-to-be-desired intimacy between 
owners of property and the administrators of insurance affairs, instead of 
being brought into closer bonds of union, have drifted farther and farther 
apart as the time went by. 

Though the sum of our administrative imperfections is legion, it is not 
essential to my present purpose to lengthily touch upon them ; but we 
may with profit discuss certain features of our practice, venturing the 
assertion in advance that the absurdities of the past eleven years are as 
intimately interwoven and identified with them, as is true of almost any 



FIRE UNDERWRITERS' ASSOCIATION. 91 

of the seemingly innumerable imperfections with which to-day our 
administrative systems are crowded. 

Taking up what purports to be an honest excerpt from the records of 
the New York insurance commissioner's office, the extraordinary fact is 
presented to us, that in the ten years ending December 31, 1891, so vast a 
field as is comprehended in a premium product of 1646,466,506 was 
requisite to yield four parts of the dollar out of ten wherewith to admin- 
ister the affairs of fifty-four of the companies of Christendom, admittedly 
in possession of the highest order of administrative skill identified with 
our profession. Taking into account all that antecedent professional his- 
tory should have taught, the revelation is a financial fiasco. With all 
due allowance made for the concededly uncontrollable element of loss, 
which called for six parts of the dollar nearly, our wonder is only height- 
ened when we reflect that men who have enjoyed the reputation of being 
the financial augurs of the profession have made such sorry use of their 
professional acquirements, as that what remained out of this enormous 
sum, after provision had been made for loss and other equally imperative 
obligations to policy-holders, was inadequate to the needs of their 
respective companies by $937,266. Possibly there are some who have 
consoled themselves with the thought that the policy-holder's share in 
their accumulations was a fund over which the company retained per- 
manent control ; but this to my mind is a feeble protest against the 
charge of incapacity, and a very paltry and flimsy support to the sound- 
ness of economic doctrines, a perseverance in which has led to such extra- 
ordinary and regrettable results. 

In my judgment there is within the scope and province of an associa- 
tion such as the Fire Underwriters' Association of the Pacific, — as is true of 
kindred organizations, — an enormous power in the direction of supply- 
ing wholesome and rational correctives. The great point is to know 
where to make the start where so many absurdities exist ; but we cannot 
be far out of the way in critically investigating latter-day methods with 
respect to two vital points identified with current underwriting practice. 
There can be no satisfactory measure of success attend our efforts, how- 
ever short of a general abandonment of many of the existing punch- 
inello methods of the day, the entire subordination of jealous rivalry 
to high and noble resolves, and the infusion into our business of an 
essential educational standard of fitness in direct connection with the 
ordinary every-day practices of those who are enlisted in the labor of 
carrying out our ideas of organization. These expressions are born of the 
belief that, to succeed in the highest sense, the strictly scientific side 
of our business must be held constantly before the gaze of the striver 
in the ranks. It may at first sight seem to him that preferment under 
these rather harder conditions will be a slower process ; but reflection 
will convince him that the fortunate winner of preferment under the 



92 SIXTEENTH ANNUAL MEETING OF THE 

newer order of things will be the possessor of intellectual rewards all the 
more desirable in proportion as they have been hardly won in a strictly 
intellectual, emulative race. We have set out to say that there were two 
points identified with our current underwriting practices, soluble, and, as 
we believe, susceptible of correction, within the domain of organizations 
such as the Fire Underwriters' Association of the Pacific. If in my 
attempt to elucidate I seem to tread on the heels of some of the younger 
members, or to outrage their personal seme of worthiness and fitness, 
believe me I am none the less inspired by an earnest desire to contribute 
to the inauguration of an era of correct principles and practices, while 
being affected by sentiments of the highest esteem, and of solicitude 
for the embryo student of underwriting science whose education at the 
present day is assuredly conducted on principles the opposite of precise 
and scientific. 

The primary object of the organization of insurance companies is con- 
cededly the beneficent one of indemnifying the single sufferer from the 
purses of communities in combination. The originating motive was in 
the highest sense a worthy and a noble one ; but, as the idea assumed 
stature, its purely mechanical side showed the need of the enlistment 
of intelligence of a high order ; and this called for its proper measure 
of compensation, aside from the right of those whose purses were drawn 
upon for indemnity, to themselves seek reasonable reward for the risks they 
assumed. In its earlier stages the supposition was that the exercise of ordi- 
nary business care and judgment w r ould provide this, and enough besides 
to indemnify the man wiiose property burned. It was, as history proves, 
a measurably correct supposition, and handsome accumulations w T ere the 
issue in many instances. It is hardly necessary to say that competitive 
and other conditions have altered the current of events visibly, until at 
the present day w T e are in the midst of an era demanding a more pre- 
cise knowledge of the economics. Heedlessly, year after year, unwise 
and unscientific courses have been persisted in ; and it is reasonably safe 
to assert that in no convention of underwriters such as this are there heard 
complimentary and co gratulatory expressions such as should charac- 
terize these reunions ; b. t on the other hand condemnatory and fault- 
finding passages against this, that or the other absurdity are the order 
of the hour. 

Let us inquire, therefore, how extensively the following circumstances 
have to do with the situation in which we find our business at the present 
day. 

First. The precipitancy with which young and inexperienced men are 
embarked as professional adjusters. 

Second. The comparative illiteracy respecting the strictly scientific 
detail identified with professional service observable in the case of the 
special agent. 



FIRE UNDERWRITERS' ASSOCIATION. 93 

With reference to the first of these propositions I am persuaded that 
the existing too general error of employing untried and uneducated men 
as adjusters of fire losses on terms precisely parallel with those upon 
which the adjuster of experience is retained is not only a plain violation 
of the commonest of economic and scientific rules, but furnishes ample 
opportunity for attaching blame to those who, in adopting it, become the 
authors of a style of education inimical in the highest degree to the 
future of the youth who is so guided. Who is there who will seek to 
deny that, in the elucidation of obscure questions, in the nice determina- 
tion of ambiguously involved titles and interests, there is not in the 
province of the adjuster as favorable a field for the employment of a 
highly trained intelligence as is true of the lawyer who expounds 
abstruse law doctrines in the presence of an enlightened Court? If 
there is aught in the fitness of things, if there is wisdom in the idea of 
estimating the value of one's service by the quality of the service, then 
indisputably the plan nowadays pursued of employing men indiscrim- 
inately on fire-loss service in seeming disregard of their previous train- 
ing is not only a rank injustice to the thoroughly educated adjuster, 
but it is besides a direct and positive outrage to the economics of the 
business. One of the results of this pernicious system is that the best 
effects of the labor of the ski led adjuster are lost to the company ; and 
another and equally harmful result is that the tyro, in being a witness 
of it, is deprived of a stimulus to the best character of intellectual exer- 
tion, and who, unless given the chance of the freest exercise in the direc- 
tion named, will reach middle life handicapped by the prospect that, 
however efficient he may become, his acquirements, few though they may 
be, are always in danger of being underestimated. 

Let us not forget (quoting from the records of fifty-four of the leading 
offices of Christendom) that the adjusters of the country were during the 
ten years ending December 31, 1890, the medium through which the 
enormous sum of $384,000,000 of indemnity found its way from the 
coffers of the insurance companies into the pockets of the premium 
payers. Let us for an instant thoughtfully inquire how large a portion 
of this sum was unintelligeutly and therefore wrongfully applied and 
disbursed. And I am persuaded we cannot but answer ourselves that, 
but for the singular economic theories which dwell in the minds of the 
administrators of insurance finance, a very considerable percentage of 
this vast sum would have been saved to the company. It would seem 
also a perfectly legitimate conclusion, as we regard the situation, that 
the chief concern of the average manager was to leave the loss ratio to 
take care of itself, if only he may at the end of a year or decade be able 
to display a moderate size ratio of expense in operating account. 

Affected to the extent I am by the ideas I have attempted to express, it 
would seem to me that if the adjuster of experience is to be the medium 



94 SIXTEENTH ANNUAL MEETING OF THE 

through which the novice is to acquire reputation and address eventually, 
that a vastly more appropriate time could be chosen for bringing him into 
professional contact with the educated adjuster that when the latter is 
engaged on some intricate loss case, calling into play the best he has at 
command. The presence of a company of tyros may, it is true, confine 
the expense contributions of certain companies to the microscopic salary 
the tyro receives for his all-round performances ;' but it is embarrassing 
to the adjuster, and not infrequently causes his plans to miscarry. 
Opposed as I am to this promiscuous intermingling of employes at 
inopportune times, I am likewise as earnestly opposed — and I view the 
question purely from its economic side — to the rules now in vogue respect- 
ing compensation for adjusting service. I presume the average manager 
will prick up his ears at this remark, and wonder what new heresy I am 
on the point of enunciating ; yet, however this may be, the plan pursued 
of compensating all men alike is as absurd as it is unjust. The per-diem 
theory should to my notion be incontinently abandoned, and give place 
to rules having their foundation on the value traceable to the merit of 
the service rendered. No thoughtful member of this association will be 
opposed to this, and it will or ought not be difficult to perceive that this, 
operating in conjunction with my next suggestion, will perform miracles 
in raising the quality of the adjusting service of the day. 

Let there be instituted within this association an adjusting bureau 
which shall likewise be a bureau of credentials and of communication, 
the province of which shall be to inculcate sound professional doctrines 
in pretty much the same fashion that law, medical and other professional 
doctrines are treated in those callings. I am convinced the most 
desirable consequences would follow its inauguration, nor am I at all 
doubtful that the younger members of the profession would give their 
instant and hearty concurrence in support of a measure which, if intelli- 
gently constructed and brought into operation, will more than any other 
thing that I have knowledge of heighten the standard of adjusting prac- 
tices in a most positive and appreciable manner. 

I am persuaded that the beneficial offices of such an institution as I 
hint at would be powerful for good, not alone in the realm of adjusting, 
but that it would fulfill an equally valuable educational office in the 
province of the special agent. For while the highest type of educational 
training is the dessert of a science so varied and manifold in its require- 
ments as is true of the science of adjusting, how eminently true is it of 
the special agent, at whose hands we are to look for the conservation of 
the primary economics of our business. Youth is unquestionably no 
bar to the operation and play of superior intelligence ; but to nicely 
analyze and discern the nearly innumerable pitfalls to which his com- 
pany is exposed as a consequence of the cupidity of agents, or the moral 
infirmities of a town or neighborhood, is no light task to impose upon 



FIRE UNDERWRITERS' ASSOCIATION. 95 

the shoulders of a young gentleman who is not only uninitiated in the 
mysteries of human nature, but whose technical training is confined to 
the stereotyped usages of his particular office. There is a too general 
habit alive of turning topsy-turvy the curriculum of these young aspi- 
rants for field honors. They now and then in the managerial sanctum 
hear what they believe to be sage references to the deep questions of 
physical hazard and moral deficiency ; but they are as utterly innocent 
of knowledge in the real intricacies of the profession they have been 
pitchforked into as could well be imagined. I do not mean to say that 
in this they are to blame at all, as, but for the remarkable ideas enter- 
tained by the manager respecting economic truths, they would have 
been subjected to such careful and thorough preliminary training as 
would have spared them many of the humiliating consequences which 
follow, whereas the company's agency and loss register would have 
been decidedly freer of blemish. 

These present and apparent evils the Fire Underwriters' Association of 
the Pacific can do much to correct and check. Let it begin by raising 
the standard of eligibility to strictly professional rank. To be successful 
in the highest sense, our organization for scientific action must be on 
different bases to those which have been current so long. Every energy 
should be directed to the work of eliminating one by one the absurdities 
which are a perpetual rebuke to us as professional workers ; and I am 
convinced none will give heartier support to these measures than the 
embryo student of the science of underwriting, who under the existing 
order of things reaches middle life with the reproachful fact staring him 
in the face that his education, if education it can be termed, is on the 
lines of error wholly, and entirely devoid of those characteristics which 
should be present, and which would serve to render his calling one of 
credit and dignity to the educated and educator alike. 

P. OUTCALT. 

(Applause.) 

Mr. H. M. Grant — Mr. President: It seems to me 
there is something in Mr. Outcalt's paper that might 
call out discussion, especially upon that point of con- 
fining the membership to those strictly of our pro- 
fessional ranks. While I have read this paper, I would 
not like to subscribe to his views in that particular. It 
seems to me that this association is an educator indeed. 
It is not like a school that sets forth some lessons to be 
learned, but every one educates some one else ; and the 
young man especially can learn here what he has got to 



96 SIXTEENTH ANNUAL MEETING OF THE 

learn somewhere else from his experience and the exper- 
ience of his older brothers. Those would be my views. 

The President— Are there any more remarks on the 
subject ? 

Mr. Carpenter — Mr. President, the thought that went 
tiirough my mind in connection with that is that Jife is 
short and that people die, and young men have got to take 
the places of the older men in the business some time or 
other. I don't know how you are going to learn except 
by experience and trying. If we say that the young man 
shall not go in and adjust a loss because of his being in- 
experienced, when the old man dies where are you? 

Mr. Watt — There is another idea in the paper just read; 
it is regarding the amount paid for loss adjustments. The 
rule simply fixes a minimum price, and that the price 
shall not be cheapened beyond a certain point ; but, as 
we all know, there are a good many in the business who 
will not perform the labors of an adjuster on a loss for 
the minimum price named in the rule, and who can 
make their own arrangements above that point. Prob- 
ably one-half of the field men who are adjusting losses 
from time to time would not adjust a loss for the mini- 
mum price named in the rules, but that is a matter 
between them and the company the) r are acting for at that 
particular time. 

The President — If there are no other remarks on that 
subject, we will listen to Mr. G. W. Harney of Marysville, 
who will tell us of the Trials and Tribulations of the Local 
Agent. I think Mr. Watt has the paper. It is short and 
inclined to be humorous I understand. 

Mr. Watt — I have been called upon to read a second 
paper, by my friend the President. 



FIRE UNDERWRITERS' ASSOCIATION. 97 

THE TRIALS AND TRIBULATIONS OF A LOCAL INSURANCE 

AGENT. 
Somewhat Autobiographical. 

My father was a native of Sweden, and a distant relative of the noted 
and famous Bjorn Bjornstein, whose literary efforts have so long afforded 
entertainment for the masses of Europe and America. The family 
record can be traced back to Lief Ericson. (This fact I have kept con- 
cealed from my famous relative.) My birthplace consisted of a small 
hamlet called Stavanchrista (fishing hamlet). It was located on a bay 
on the fiord of Drontheim. It is now a port with a long and important 
wharf, but at that time was a happy and peaceful neighborhood strung 
along a quiet street of beautiful sand, that had a terminus in the moaning 
tide of the Arctic Sea. (I got this description from a novel by a Califor- 
nian author.) This was a peculiar sort of birthplace to select ; but, as its 
selection was the result of circumstances over w T hich I had no control, I 
have accepted the inevitable and have nothing to say in regret. 

My early life was uneventful. It was for the first three years just such 
a history as might be written of any ordinary person. Beyond being 
fished out of the bay at various times, and getting an abnormal quantity 
of sand in my youthful craw (which was not a detriment, as my Califor- 
nian experience has proven), and giving frequent exhibitions of insomnia, 
of which my father was not proud, I led a quiet life. My paternal ances- 
tor was a fisherman. During the years that I w r as budding into manhood 
I learned, through his kind condescension, to be a fisher also; and it 
was a training which was to fit me in after years for the atmosphere of a 
local insurance office. 

Passing on rapidly over this dull and uninteresting portion of a personal 
memoir, let us proceed to the actual moment when I bloomed into man- 
hood. 

I remember well the day the letter came that called me away from my 
ancestral home to meet the great, coarse, brutal world. A relative in 
America had offered to settle us on a Californian colony. (I forget now 
how much commission he would have made.) My parents, considering 
that they were too old to accept of the kind offer, insisted that I should 
emigrate. In explanation of their apparent un naturalness it is fair to 
say that they were very poor ; but they were honest ; they were so honest 
that it occasioned comment. As they grew older they found that their 
integrity had become so fixed upon them that they could not throw it off. 
This idea had never occurred to them before ; but it flashed upon them 
at the time of my departure : " We are now past middle age," they said ; 
" and it is hard to teach an old dog new tricks. We shall no doubt die 
as we have lived ; but you," they said, with tears in their eyes, "you are 
yet young. Your principles are still plastic ; you are like versatile clay 
in your hands. You can be what you will. Shun, if you can, the errors 



98 SIXTEENTH ANNUAL MEETING OF THE 

we have made. Do not allow any habit whatever to obtain entire con- 
trol over you." 

I now budded into manhood, and after crossing the boundless deed 
and desert wastes was soon in California with my relative. He found 
me a nice position in a wholesale establishment to which was attached 
the pleasant duty of repacking salt codfish in the cellar. The estab- 
lishment in which I had found employment had many departments ; and 
after years of incessant toil, and an earnest devotion of leisure hours to 
acquiring an education, I became a self-made man, and was promoted to 
a responsible position. 

My rise in the world after this was rapid. One day the president of an 
immense gun foundry, having heard of my exceeding ability, sought me 
out and appointed me to be cashier of his extensive institution. I had 
not long occupied this office before I was persuaded by a sage physician 
to adopt the profession of a "local insurance agent." He proved to me 
conclusively that it was a profession ranking with the highest ; he 
pointed how I might enjoy the green fields and bright skies, and at the 
same time perform a labor of love for my fellow-man. When he pointed 
out too that the emoluments (commissions) would be large for such 
services I adopted his advice, retired to a seacoast city and became an 
insurance agent. The point of view has all to do in such cases as the 
one I have just related. I know some people who do not consider that 
the office of local insurance agent is the highest in the land ; but, when 
a man reaches the point where he can't be anything else, it is the 
highest position in the land. 

Now don't say that the foregoing history is entirely irrelevant ; it 
shows how local agents are recruited. 

Well, after buying out the interest and good will of an established 
agency (and the bad will of every other insurance agent for miles around), 
I settled down to enjoy perfect contentment. (Insurance agents are 
supposed to never have anything to do, unless they wish to.) 

The first business I had with the general agent of the company that 
I represented was a visit from his special representative. He came a few 
months after I had been in business. I was sitting at my long writing 
table one pleasant morning when a bright, genial looking young man 
walked into the office and announced that he was the special agent of 
the British India Fire Company of Rhatore. That was my company. I 
quietly asked him to have a chair, feeling that it would be right to treat 
him with great cordiality and respect, as he appeared to be a personage 
of vast importance. His genial salutation and warm shake reassured me, 
and it was not long before we were engaged in discussing the city's 
prospects, the weather and other important topics. I am rather a sus- 
ceptible person, constantly endeavoring to please, and the "special'' 
soon grew to feel quite at home. During a lull in the conversation he 



FIRK UNDERWRITERS' ASSOCIATION. 99 

pushed his hat back on his head, put his feet on my desk, and drew 
from his case a cigar. This he lit, and it was not long before the rich 
odors of an Havana were being deflected downward by the ceiling. 
After musing a moment (he was probably sizing me up) he turned to 
me and said: "Mr. Bjornstein, our company, the India of Rhatore, is 
the biggest in the world ; there's none to compare with it. You have 
represented us now three months, and my advices from the general 
agent say that you have only sent us a beggarly thousand dollars in new 
premiums. How in h— — do you suppose the general agent can afford 
to send ' specials ' around the country, pay them big salaries, permit 
them to smoke fine cigars, and not get more business from such fellows 
as you ? They can't doit, sir." 

Imagine my feelings. I had worked hard; and this was to be the 
reward for my best endeavors to assist the company. It was too much. 
With a sudden bound to my feet, and with choking speech, I said : 
"Mr. Blank, if you're not satisfied with what I have done for your 
company you can take the supplies and other property of your company 
out of this office. I shall have nothing further to do with you." 

11 Well ! well ! my friend, no harm intended, I ! I !" 

But I was inexorable, and refused to have any further conversation. 
Thus it was that I parted company with the biggest company in the 
world. A new agent was appointed, and I was compelled to fight hard 
to retain the business ; but I did it. I have been an insurance agent 
now for ten years, and it has just dawned on me that the special agent 
was joking. In looking back over the eventful days of my insurance 
career I cannot recollect receiving such treatment from any of the 
numerous specials who visited me as was accorded me by the first special 
I met. Special agents are as a rule the most convivial gentlemen in the 
world. 

I lost lots of good commissions on account of my early training. One 
day a prominent citizen called at my office and requested that I insure, 
for a fairly large sum, his barn and hay. He being a reputable man, 
and I having some knowledge of the value of his property, issued the 
policy. On inspection of the risk a few days afterward I noticed, through 
a wide crack in the building, that the color of the hay seemed to change 
at about the middle of the crack. On top it was oat color, but the bot- 
tom seemed to be green or off color. On investigation I found that the 
top hay was first class, — from oats. The bottom was a rank cut of weeds 
and alfalfa. Calling on the assured I explained my discovery and sug- 
gested that a reduction of the amount written on the hay would be 
about the proper thing to to do, taking everything into consideration. 
He said that I wasn't a good judge of hay (if he had said whisky I 
might have resented it), and that he would not consent to a reduction, 
so I took up and canceled the policy. My most active competitor 



100 SIXTEENTH ANNUAL MEETING OF THE 

accepted the business the next day upon the terms that I declined, and 
in the due course of six weeks got his commission from the company, 
when he deducted the premium from the money that was sent to settle 
the loss. 

Among the pleasures of the local's life is the occasional discovery that 
the General Agent is in competition with him in his own field, and has 
written directly sundry fine risks without advising with him. These 
little discoveries are considered by locals to be good for sore eyes. 

Space forbids me to recount further the hard knocks that locals get 
during the course of their existence. I never heard of a local making 
any money out of the business. The entertainment of specials, the patron- 
age of church fairs, buying liquid cheer for probable insurers, and the 
indulgence in broadcloth costumes, all conspire to keep him eternally 
broke. But there is one thing : they do piles of good in their respective 
communities. How many good people would be bankrupts, and how 
many widows and orphans go unfed, if it w T as not for the local agent ? 
He would probably get some credit for his philanthropic labors if he 
were not so decidedly numerous in every community. 

G. W. HARNEY. 

(Applause.) 

The President — The closing paper for the day is on 
the subject of The Evils of Open Insurance, by. Mr. J. 
A. Marston ; I think Mr. Edwards has the paper. 

Mr. Edwards — Mr. President and Gentlemen : It is 
very difficult for me to read my own production, much 
less that of others. I will do the best I can, however. 

THE EVILS OF OPEN INSURANCE. 

While casting our efforts in various directions for improved methods 
tending to secure safe and permanent remedies for the numerous evils 
now existing in fire hazards, both moral and physical, would it not be 
worthy a concerted action and trial to eliminate to a great degree a very 
dangerous and rapidly increasing moral hazard, which, if not tending to 
cause numerous fires, certainly offers strong temptation to the insuring 
public, a part of which vast body we must admit are not proof against 
thought and' design for chances to further their individual condition. 
My reference is directed more especially toward the old, i( weather-beaten, 
over-insurance evil," now growing steadily through the channel of the 
open concurrent insurance clause. Were you desirious of creating a loan 
upon a parcel of real estate, and numerous companies were clamoring to 
place it for you, would they advance money or close a loan until they 



FIRE UNDERWRITERS' ASSOCIATION. 101 

knew the value of the security, its every feature tending to increase or 
decrease its strength, including title, amount of insurance, and income 
derived therefrom? No ; not a dollar would be loaned until they knew 
what they were getting in return. Again, were you to solicit from the 
owner of a growing grain crop his insurance upon the same, would you 
omit to ask the probable yield per acre, and the value thereof? Would 
you fail to note how much, if any other, concurrent insurance was car- 
ried ? If you did, would the manager pass your report ? 

Why, then, do you, gentlemen, as conservative underwriters, pledge 
your company's money until you know you are getting value received ? 
There is no use to deny the fact that a great many of you are doing this 
very thing every day, and at the same time creating a moral hazard for 
which no adequate rate can be found. Only a few years ago this "other 
concurrent insurance " privilege was not generally in vogue, being only 
extended to gilt-edged merchants. Now, however, we find it steadily 
growing upon us until every class of merchant enjoys this "open clause," 
if he so desire. The result has been to cause locals to lose sight of its 
importance, and has placed many merchants upon a pedestal from which 
they cannot be approached ; they would not deign to tell you — the local 
or special agent of the company — how much stock they carry, nor how 
much insurance there is thereon. Your interest becomes subservient to 
theirs. Are you satisfied to allow it to continue and grow ? Can you not 
see the apparent danger if not checked, — not only checked, but stopped ? 

To my personal knowledge there are to-day merchants carrying insur- 
ance fully up to the cost value of their stock, and in reality in excess of 
the market value of the same, when known and admitted that you can 
buy their wares in lump for seventy-five cents on the dollar, and even 
less. I refer more particularly to stocks in towns or cities that are 
retrograding or going through a dull spell, the extent of which cannot 
be foreseen. The desire to sell out is their constant thought. While 
the merchant may be too honest to fire the property, or perhaps afraid 
of the results of such a course, you will find some who will risk the 
chance of getting their insurance money. Others, who are too consci- 
entious to fire the property, will allow an accumulation of inflammable 
matter to collect in and about their premises, thinking that maybe some 
accident might happen. It will not be their fault if it does not. They 
are paving the way. But admitting, to save argument, that all mer- 
chants are honest, would you expect the same care used to prevent fires 
from the average merchant who is fully insured as from that class who 
are carrying their own risk or fully one-third of it ? 

Mr. Bond, who has a large general merchandise stock located in the 
town of Union, gives to a pushing agent a line upon the same (more to 
accommodate the agent, perhaps, who trades with him quite liberally). 
We meet the daily report of this line in the manager's office, who, as he 

F. U. A. 7. 



102 SIXTEENTH ANNUAL MEETING OF THE 

opens the morning's mail, says pleasantly to the clerk, "Now that's 
nice ; splendid starter for the day. Good for our Union agency ! Sends 
us ten thousand line on Bond's stock. Good risk, too : valued at 
|30,ooo." "How much insurance does he carry ?" ventures the clerk 
(from a desire to appear interested). " Why, other concurrent insur- 
ance ; " and passing the daily report to the clerk he requests the line 
written and a nice letter of thanks sent to the agent at Union for the 
splendid risk of Mr. Bond (upon which the assured has other concurrent 
assurance)! How thoughtful of him, and how kind of the company to 
allow and encourage him to carry other concurrent insurance (of an 
unknown amount). 

That line is renewed for several years. Business is dull and the town 
very quiet. A fire occurs in the store of the assured, and entirely con- 
sumes the stock, which, in adjusting, we find to foot up $20,000, upon 
which the companies are carrying $25,000, "including other concurrent 
insurance." Perhaps the assured has been considerate enough to burn 
only himself, but the world is ungrateful and maybe the entire block 
goes. To be sure you get the premium for the entire policy, and can 
show a salvage, provided you are not carrying on other property 
destroyed in this same fire. But, if other losses accompany it upon 
which you also have lines, how would you then figure your salvage ? 

A very recent case came to light during the late La Grande fire. 
Though not on the loss myself, I was very well acquainted with its 
supposed founder, and the stock he carried (having sold him the greater 
part of it). Our friend Mr. Outcalt could give you a very vivid account 
of the particular case, and the direct cause of this one of too many 
similar fires. I refer to the lines carried on the stock of I. Harris, some 
$3,800 insurance upon a stock, the highest possible value of which was 
$2, coo. Had the questions on daily report blanks been fully and properly 
answered, with the one of other concurrent insurance, and amount of 
s lme, the excessive covering given could not have passed the general 
agents' offices ; or, if the valuation had been excessive, the specials inspec- 
ting for the several companies would have noted on looking at the 
stock the inconsistency of such an allowance of covering. A moral hazard 
of no small order would have been checked, and a fire loss aggregating 
many thousand dollars been avoided. That Harris may not collect a 
dollar from the companies carrying his property is little solace for the 
remaining companies who paid losses emanating from that fire "along 
with its other concurrent insurance." 

I hold, gentlemen, that until you eliminate that dangerous practice 
of effecting new or renewing old policies without insisting upon specific 
statements as to amount of stock, date of last inventory, and amount of 
insurance carried in dollars and cents, and not in the evasive and oft- 
deceiving term of "other concurrent insurance," you will be burdened 



FIRE UNDERWRITERS' ASSOCIATION. 103 

with a load which, if given time, will prove a heavy incentive to incen- 
diarism. I do not believe the values given by the assured will always 
prove truthful. But if your report slips gave the special inspecting the 
detailed information, he as a rule would soon detect if the load were too 
heavy for the company, and cancel out. Were the Pacific Insurance 
Union to pass a rule requiring answers to the questions stated, it would 
stand, be obeyed, and cover the ground. Without their aid, however, I 
doubt if it would, generally speaking, be enforced. This and that local 
would have some excuse for its omission, and little by little its teachings 
would be ignored by many, and the few who did enforce it be illy com- 
pensated by the protection it ought to afford. The locals, however, 
stand in silent submission to compact rules. He too often, however, 
neglects or ignores the instructions of his companies, especially relating 
to those which may appear to him as minor details of a red-tape nature. 
Understand me, I do not say abolish other concurrent insurance, but 
insist upon having each and every application or daily report specify, 
under direct question to the assured (and signature, if possible), amount 
of stock and insurance carried at that particular time. Various specials 
inspecting business would be aided in their work ; and, as a majority of 
risks have expiring lines at various times during the year, a much closer 
and safer check would be had upon the business generally, some depart- 
ments of which will be greatly improved if proper methods be found 
for their protection. j A MARST0N . 

(Applause.) 

Mr. Sexton — Mr. Chairman : This is one of the most 
important questions before this meeting at this time, 
and, to my mind, it is the most important question 
before the underwriters of the Pacific Coast. This 
u Total other insurance permitted without notice until 
required," put on everybody's policy, gives any amount 
of insurance they are a mind to apply for ; and the spec- 
ial, visiting the risk, has no means of ascertaining what 
the man is carrying in proportion to the value of his prop- 
erty, and in my experience I find more bad effects from 
it, and have made many good salvages adjusting losses on 
policies containing this form. I have talked about it to 
the managers of the Pacific Insurance Union and others, 
but have never been able to get any satisfaction. If we 



104 SIXTEENTH ANNUAL MEETING OF THE 

put an endorsement on a policy, " Total insurance per- 
mitted/ 7 or " Total concurrent insurance permitted, " put 
it on the daily report. If a man wants $26,000 con- 
current insurance put on his policy, put it on the daily 
report, and then we know what he is carrying. You 
might except large wholesale establishments, but all ordi- 
nary property risks ought to have an endorsement like 
that on the policy. I am glad the question came up, and 
I hope we will do something about it before we adjourn. 

Mr. Carpenter — It seems to me that the three-fourths 
value clause, such as is used in Texas, might be used in 
that connection. " Other concurrent insurance, not 
exceeding three-fourths of the value of the property, 
permitted/ 7 would meet the case, because very often a 
merchant will say, " My stock is varying, and I don't 
want an endorsement made limiting the amount.' 7 Bj r 
putting that three- fourths' value clause on I think it will 
cover the ground. 

Mr. Andre — Mr. Carpenter anticipated what I was about 
to say ; but I think it is a very important item to know 
the amount of insurance that is carried, not only to pro- 
tect ourselves against incendiarism, but also to know 
what lines we are going to carry. I had an experience 
down here south of Market street three or four years ago, 
when the big fire occurred there. There was a man 
carrying about $10,000 insurance on $125,000 worth of 
property. The loss was about $10,000, being a total loss 
to the companies. I think it is important that we should 
know the amount of insurance the assured has, so that 
we can govern ourselves accordingly. I believe that is 
the case with the Z. C. M. I. of Salt Lake ; but you can- 
not carry a full line, because there is not enough insur- 
ance carried. 



FIRE UNDERWRITERS' ASSOCIATION. 105 

The President — These defects come up from time to 
time. We know they are wrong. We keep on allowing 
the assured to get the best of us year after year. At our 
annual meetings we discuss the matter, talk it over, but 
there is nothing done. There really ought to be some 
action taken on the evils which are staring us in the 
face. And what is the remedy ? The Pacific Insurance 
Union, it seems to me, could take that matter in hand 
and absolutely require every daily report coming into 
their office to state the amount of insurance permitted 
under that policy. That would cover the whole thing. 
We cannot do this as an association : we can only point 
to the remedy. The company which accepts a line of 
insurance, as Mr. Andre just stated, should know of all 
other insurance. 

Mr. Watt — My experience in the Pacific Insurance 
Union is that if any one will think out a plan to comple- 
tion and present it when developed and ready to be 
adopted by the Union, if it is a matter that goes without 
saying is a good thing, that they will take hold of it; but 
the trouble is that what is everybody's business is no- 
body's business. If a plan is devised and a committee 
appointed to properly present it to the Pacific Insurance 
Union, I think we will accomplish something, but we 
never will accomplish anything by making suggestions 
in a general way. 

Mr. Folger — The suggestion made by Mr. Carpenter 
that the three-fourths' clause would answer the purpose, I 
think is scarcely true in large cities. In Portland I know 
positively that there are merchants of years' standing 
who carry more than that. I am confident that if the 
Pacific Insurance Union should require that other con- 
current insurance should be reported on the daily report 



10(> SIXTEENTH ANNUAL MEETING OF THE 

with specific amounts, that the rule would be enforced. 
But the association through a committee cannot induce 
every member of the Union to agree that he will instruct 
his agent to follow that plan. 

Mr. Watt — There are rules of the Pacific Insurance 
Union which are not enforced, nevertheless there are a 
great many rules that are enforced, for instance, the rule 
in reference to gasoline stoves. Recently we have re- 
ceived a circular which changes the form a little and 
makes the gasoline permits that are in the hands of the 
agents valueless, and w^hich must be replaced by new 
forms, or else the rule must be changed. Now, if the 
Executive Committee w T ill waste so much time on the 
matter of gasoline stoves, it would seem that they could 
be induced to take some action in the matter of other in- 
surance permitted, if it is brought before them in proper 
shape. 

Mr. Sexton — I move that the Pacific Insurance Union 
be requested to take action in this matter. 

Mr. Ashton — I second the motion. 

Mr. Edwards — I second the motion, but I don't be- 
lieve they will do it. I never knew T the Pacific Insur- 
ance Union to do anything, or move upon any subject, 
that was brought before them by this association. 

Mr. Watt — I move as an amendment to that motion 
that a committee of three be appointed, who are members 
of this association, and who are not members of the 
Pacific Insurance Union, to put this matter in shape and 
present it to the Pacific Insurance Union. 

Mr. Edwards — I will second that amendment. 

The President — The question is on the amendment of 
Mr. Watt. Are you ready for the question ? 



FIRE underwriters' association. 107 

Mr. Sexton — On that amendment I would say this : 
that the simple endorsement of so many dollars total in- 
surance permitted on this property is about the shape 
that I suppose is needed; that is my idea. Then, if we 
can get that, it will be something to start with. They 
have acted on the suggestions of this association. They 
adopted a watchman's clause the other day which was 
endorsed by this association, and they do once in a while 
act upon our suggestions. 

The President — Are you ready for the question ? All 
in favor of the appointment of a committee of three, 
members of this association, who are not members of the 
Pacific Insurance Union, to take this matter in charge 
and present it to the Pacific Insurance Union, will please 
say aye. Those opposed, no. Carried. 

I will defer the appointment of the committee until 
tomorrow. 

On motion, meeting adjourned until ten o'clock A. m. 
of the following day. 



108 SIXTEENTH ANNUAL MEETING OF THE 

SECOND DAY. 

February 17, 1892. 
The President — The meeting will please come to order. 
We have a little surprise in store for us this morning in 
the shape of a communication from Messrs. Belden & 
Cofran, which I will read : 

February 16, 1892. 
W. H. Lowden, 

President Fire Underwriters* Association, City. 
Dear Sir: On behalf of Mr. J. Weatherwax, representing several fire 
insurance companies at Aberdeen, Washington, we present to the associa- 
tion the elk head that graces the walls of your assembly room to-day. In 
making this presentation Mr. Weatherwax desires us to express to the 
association his good-will and kindly feeling for each member, and begs 
that the head be accepted as an evidence of the high esteem in which he 
holds all loyal insurers. We suggest that the association tender to Mr. 
Weatherwax a vote of thanks in acknowledgment of this gift, and also 
instruct its Secretary to address to him a letter in his, the Secretary's, 
usual happy and graceful style. 

Very respectfully, 

BELDEN & COFRAN. 

Mr. Wetzlar — Mr. President: In accepting the present 
from Mr. Weatherwax I move, sir, that a vote of thanks 
be tendered to this gentleman, on behalf of the associa- 
tion, and that the same be engrossed and a copy thereof 
sent by the Secretary to Mr. Weatherwax. Carried. 

The President — I have a telegram from Los Angeles: 

We greatly regret our enforced absence. Wishing you all the merriest 
of times. DRIFFIELD & HOPKINS. 

The President — Yesterday afternoon a paper was read 
by Mr. Edwards, the contribution having come from Mr. 
Marston, on the subject of Open Insurance, and the 
President was authorized to appoint a committee to lay 
the matter before the Pacific Insurance Union, and to 
recommend that daily reports hereafter should not be 



FIRE UNDERWRITERS' ASSOCIATION. 109 

approved by that institution unless the additional insur- 
ance permitted be specifically stated upon the daily re- 
port. As such committee I will appoint Messrs. Edwards, 
Kinne and Ashton. 

Mr. Faymonville — Mr. President: Before we proceed 
with the work of the meeting, I would like to introduce 
to the members here Mr. George P. Low, the Chief 
Electrical Inspector of the Pacific Insurance Union. 

The President— Gentlemen: I take great pleasure in 
introducing Mr. Low. It is hardly necessary to intro- 
duce the gentlemen, he is so well known by reputation 
to all of us. We are glad to welcome you, Mr. Low. 

The first thing on the programme this morning is a 
paper by Mr. Edward Brown on The Written Part of the 
Policy. 

Mr. Brown — Mr. Chairman: I would like to say that 
the gentlemen will probably find this article to be some- 
what disjointed, there being a lack of continuity in it. 
If they do, please kindly attribute it to the fact that it 
has been dictated at odd moments, when I had oppor- 
tunity to work a little at it, and therefore it possibly may 
be marred somewhat by that fault. 

THE WRITTEN PART OF THE POLICY. 

It has, I believe, been customary at these annual "functions" for 
somebody to present an article on " forms of policies." So far as I can 
remember all previous writers upon this subject have devoted themselves 
to the question of the printed conditions, thus confining their efforts to 
the one contract in a hundred, viz., that under which a loss is sustained, 
and treating of that one only as to its status after the fire. 

Upon the theory of an " ounce of prevention " being of greater worth 
than a u pound of cure " I propose to speak of the specific written con- 
tract rather than of the general printed conditions, and to try, not so 
much to point out, — for all of us are aware of them, — as to dilate upon, 
the evils arising from unintelligeutly and insufficiently expressed written 
forms. 



110 SIXTEENTH ANNUAL MEETING OF THE 

The subject is so big and so wide that it will be necessary to divide it 
in order to handle it properly. You will, I think, agree with me, that 
there is no good reason why an insurance contract should not be drawn 
with the same degree of care and thought, the same desire to have it 
clearly express what is intended, as does any other kind of contract, 
deed or other legal instrument. Probably nothing else so markedly 
illustrates the difference between an underwriter and an " insurance 
man " as the " forms of policies " issued from their respective offices. 

OCCUPATION. 

Broadly speaking, the whole theory of fire insurance is supposed to 
hinge upon the question of premium rates. Differential rates, graded 
according to the degree of hazard, are named for dwellings, churches, 
schools, public buildings, warehouses, stores, hotels, all the varying mills 
and factories, from the standard silk or cotton mill to the planing mill, 
powder works or nitro-glycerine factory. What then do you say to the 
so frequent policy covering ' ' on his two-story building situate on the 
south side of Main Street in the town of Blankville," the only addition 
being that of the State abbreviation? There is the entire contract, — 
no stipulation as to whether the building is to be occupied by owner or 
unknown tenant ; no restriction as to its use ! The complacent insur- 
ance man (it must be quite apparent that no underwriter would be will- 
ing to father such a fledgling) trusts to the general printed conditions to 
limit and govern the contract. It is quite unnecessary that he should 
bother his head about anything more than to secure a risk and a 
premium. It don't pay to take time to use his intelligence and his skill 
to frame such sentences as would express what his client and he intend 
to cover. So in a business where the rate, still broadly speaking, is 
everything, contracts are made by the thousand, whereby, for a fixed 
price, usually a small one (for these abortive policies must frequently 
apply to the less hazardous risks', it is agreed to cover for a year, or 
longer, without regard to the hazard ! Thus, whilst professing to act 
upon the theory that the consideration charged must be in precise accord 
with the hazard assumed, contracts are daily entered into which entirely 
ignore it. Let me suggest a few simple forms which would clearly 
specify and limit the uses of the building to be insured, or containing the 
property to be insured, and which would guard against any material 
increase of hazard, and guarantee to the company that the risk would be 
practically the same during the whole term of the policy as at its incep- 
tion, viz. : 

1 l On his two-story brick building, with metal roof, and on the one- 
story brick attachment, also with metal roof, in rear and adjoining and 
communicating therewith, while occupied for mercantile purposes, foi 
offices and for dwelling rooms, situate," etc. 



FIRE UNDERWRITERS' ASSOCIATION. Ill 

' ' On their merchandise, consisting chiefly of groceries and farm produce, 
while contained in the two-story frame building, with shingle roof, occu- 
pied and to be occupied for retail stores and lodge rooms, situate," etc. 

" On his six-story brick building, with composition roof, situate Nos. 
i to 9, inclusive, on the west side of A Street, between First and Second 
Streets, in the town of, etc. Permitted to be occupied for mercantile 
purposes, for printing offices, for paper-box making, — no steam power to 
be used, — and for other purposes not more hazardous." Modifications 
of these must be made to suit the circumstances, and forms for special 
cases can be found in printed manuals. 

I suppose it is impossible, except in a few instances, to go back to the 
careful conservative days when each contract was based upon an appli- 
cation, and it was the rule to write in the policy, " As per application and 
diagram on file in this office, which is made a warranty by the assured 
and a part of this policy." It may be news to some to say that there are 
some offices in this city which insert this cla se in a very large propor- 
tions of the policies issued by them. 

OWNERSHIP AND INTEREST. 

In the matter of ownership and insurable interest, often little or no care 
is taken to ascertain whether these are correctly stated. Nearly all poli- 
cies contain a printed condition which plainly states that, if the interest 
of the assured in the property be other than an unconditional and exlcu- 
sive ownership, it must be so expressed in the written part, otherwise 
the policy shall be void. How few stop to ask the applicant whether 
his ownership is an exclusive one ; whether or not he has given any 
other party an option of purchase ; whether or not the title is in him ; 
whether or not he owns the land as well as the building ; whether there 
is any mortgage upon the property or not. Contracts (which agents are 
daily filling out and delivering) contain conditions bearing upon these 
and many other points ; and yet how few agents have more than the 
faintest idea of the terms of the policies which they are issuing to their 
clients. We venture the assertion that if these conditions were under- 
stood by agents generally, if information about the status of the property 
which they are insuring were carefully sought for, and the contracts made 
in consonance with the facts, the number of fires in the United States 
would be fewer by a very considerable percentage, and the enormous 
and disgraceful waste of nearly four hundred thousand dollars a day would 
be vastly reduced. 

The general public, always excepting intelligent business men or prop- 
erty owners, do not seem to have yet learned that an insurance policy 
is a legal contract ; whilst they invariably lose sight of the fact that it 
is a personal one,— that it does not follow the property any longer than 
while the status remains precisely as it was when the insurance was made 
and accepted. They are apt to consider that it is an insurance upon the 



112 SIXTEENTH ANNUAL MEETING OF THE 

property almost regardless of questions of ownership, interest and incum- 
brance ; consequently when the property burns they incorrectly argue 
that because the company has received a premium for insuring it that 
therefore the loss ought to be paid, provided there be no absolute proof 
that the fire had a fraudulent origin. A very large percentage of the 
agents who do the business of the companies have no clearer idea than 
this as to the contract of insurance. When it is found after the fire that 
the building described in the policy stood on leased ground ; or that the 
owner had given to some one an option of purchase ; or that the interest 
of the assured was only a conditional one, — then the agent excuses the 
error he has committed by saying that he supposed the assured was the 
sole owner, had no reason to believe to the contrary, and never thought 
to ask the question. The assured, when asked why he did not reveal the 
true status of the case, says that nobody asked him anything about it, 
and he did not know that he was expected to say anything. If the com- 
pany should refuse payment on the ground that there was no liability, 
it incurs the resentment of the agent, who thinks that it is too technical ; 
of the public, which is of the opinion that it is trying to swindle a poor 
innocent policy-holder. If dragged into court it incurs the expense of 
a lawsuit, the odium of being litigious, and of taking advantage of 
technical loop-holes, — this too often in face of the fact, that had the 
company known of the actual relations between the assured and the 
property it would not have assumed the risk, and therefore would have 
incurred no liability. It has met with a disastrous loss through the 
ignorance or carelessness of its agent, and because of the loose, slip- 
shod methods that fire insurance has fallen into. Then, to avoid a 
worse state of things it pays the loss, feeling perfectly confident that the 
policy-holder has been vastly benefited by the fire. 

LOSS-PAYMENT CLAUSE. 

Another great evil is the insertion of the clause, " Loss, if any, payable 

to , as his interest may appear." The unthinking agent or 

manager imagines that these words refer only to the financial interest 
which the payee may have in the property. If this were the case it 
would be bad enough, because it puts upon the company the burden of 
ascertaining, before it pays over its money, that the said interest equals 
the sum which it pays. Unfortunately the courts of some States have 
held that the words quoted apply also to the kind of interest which the 
payee may have in the property ; and it is more than likely that before 
long we shall have a court deciding that, where the mortgagee has become 
the owner between the issuance of the policy and the date of the fire, the 
policy is valid, although no assignment has taken place, notwithstanding 
and in contradiction to the condition which says that if any change take 
place in title or possession, whether by judicial decree or otherwise, the 
policy shall be void. 



FIRE UNDERWRITERS' ASSOCIATION. 113 

MORTGAGEE CLAUSES. 

Worse than the evil just referred to is the mortgagee clauses, which 
have been drawn up by the payees themselves without any reference to 
or consultation with the companies, whose money is at stake, and which 
the companies have, with criminal folly, accepted because of competition 
for the business influenced or controlled by the mortgagees. These one- 
sided forms nullify the contribution clause in the policy ; nullify other 
important conditions ; make the companies using them liable to pay an 
amount largely in excess of the value of the property destroyed ; compel 
them to remain ignorant of the individuality of the persons interested in the 
property ; and subject them to the necessity of ascertaining, after the fire, 
who is the actual mortgagee to whom they can, with safety, pay the claim. 

About a year ago there came to the knowledge of certain offices in San 
Francisco, information that a number of fires which had within a recent 
period occurred in a certain town in the northern part of this State and 
its vicinity were of more than doubtful origin. It was ascertained upon 
examination that in each case the property was either owned by or was 
mortaged to a moneyed man living in that town, or else, if neither owned 
by or mortgaged to him, that the owner was indebted to him. The com- 
panies which had insurance upon his own property all canceled. One 
company was carrying lines upon a number of farm properties in that 
vicinity. It was thought best to write to each of the assured asking him 
if his property was mortgaged (and his attention was called to the con- 
dition of the policy touching mortgages), and if so who was the 
mortgagee. Quite a proportion of the answers showed that the proper- 
ties were mortgaged to this very man who had been interested in so 
many fires. The company thereupon immediately canceled every policy 
so affected, and no doubt saved itself from more than one loss claim. 
Now, the mortgagee clause, so general in use to-day, provides that the 
mortgage may be assigned without notice to or consent of the companies. 
Thus they lose all control or dominion over the question of personnel, 
and are deliberately putting a noose around their necks which some day 
may be tightened with very unpleasant results. Further than this, these 
clauses place upon the company the onus of ascertaining who may be the 
mortgagee at the time of the fire. This comprehends the cost of a search 
and the possibility of paying the claim to the wrong person. 

OTHER INSURANCE PERMITTED. 

The practice in this field in relation to permission for granting other 
insurance is not quite as bad as that which used to be followed in the 
Bast, and is probably still in vogue there, for we do use the word 
" concurrent." Apart from this good feature, however, the unlimited 
use of the permit is greatly to be deplored. The phrase, " other con- 
current insurance permitted," is allowable where the subject of insurance 



1 1 4 SIXTEENTH ANNUAL MEETING OF THE 

is personal property and necessarily of a fluctuating value, as, for instance, 
goods in bonded or free warehouse, grain, etc., on storage, wholesale 
stocks, and a few other instances ; but with these exceptions the clause 
should always contain the maximum amount, and there should always 
be a safe margin between that amount and the present value of the 
property. There should never be less than twenty per cent, whilst in 
many instances, particularly in the case of long-term policies, thirty- 
five per cent would be about right. This is one of the points which 
should be the duty of every field man to explain to his agents, and to so 
explain it that they will have a right comprehension of the subject. I 
have seen the clause inserted on policies and daily reports where the 
property was insured up to the full percentage permissible, and have 
known a policy for five hundred dollars issued on a building, worth not 
more than seven hundred, to read, ''Other concurrent insurance per- 
mitted." That agent evidently thought it was a part of the formula to 
be adopted in all cases. 

It is the custom of most managers to place, in the hands of those who 
need educating, a copy of some instructive manual, either Tiffany's or 
Hine's or Otey's or of some other able writer, which prescribes forms to 
be followed in the writing of policies. In the valuable work published 
by H. I. Tiffany & Co. there are no less than thirty-eight pages devoted 
to forms of policies, whilst Mr. Otey gives eleven pages of his instructive 
book to the same subject ; yet the information and good advice given 
in these books is practically thrown away by managers daily putting 
their approval stamp on reports which ignore all the primary rules 
relating to this subject. One-half hour of oral instruction from a com- 
petent special agent would make a deeper impression upon the agent 
and produce more good results than all the printed rules that can be 
given to him. The chief end of men who fill the responsible, onerous 
position of special agents is to teach the local agent how to get business ; 
the next and most important essential is to show him how to write it 
after securing it ; and for this purpose he should be clearly and explic- 
itly instructed in "The Written Part of the Policy." 

EDWARD BROWN. 

(Applause.) 

The President — The evils so ably presented by Mr. 
Brown appear to me well within our control. There is 
no reason in the world why we, as special agents, should 
not instruct the agent how to write the policy correctly. 
He does not make use of these imperfect forms for the 
purpose of securing business. It is carelessness. It is 



FIRE UNDERWRITERS' ASSOCIATION. 115 

ignorance in a great many cases ; and I think the sug- 
gestions contained in Mr. Brown's paper should be taken 
to heart by every one of us, and we should see that our 
agents are properly instructed in the writing of their 
policies. The mortgagee clause to which reference has 
been made has got into very bad shape on this Coast, 
and it is getting worse every day. We are encountering 
from loan associations objections to the present form even 
as it stands, and bad as it is, — bad for us, — they want 
something more. I understand, however, that this clause 
is now before the Pacific Insurance Union for action, and 
that we will soon be favored with a proper form, which is 
very much needed. 

The next paper that we have on our list is by Mr. Fay- 
monville, the subject being, The Insurers' Liability on 
Buildings in Course of Construction. 

THE INSURER'S LIABILITY ON BUILDINGS IN COURSE OF 
CONSTRUCTION. 

Beginning with the proposition that the insurer's liability follows, and 
is governed in amount by, the loss or damage to the insured, I will 
endeavor to make my remarks as brief as possible, although in doing so 
I may not succeed in gathering up the elusive points of the subject as 
fully and as comprehensively as I may wish to. 

There can be no doubt that an insurable interest exists in favor of 
some party or parties in a building in course of construction ; and assum- 
ing that the policy is properly written, and that the loss, whatever it 
may be, is properly within the scope thereof, we arrive at once at the 
query : What is the damage in money suffered by the assured, be he 
owner or builder, by the burning of the building in course of construc- 
tion. 

The actual amount of damage in dollars done by the tire to the build - 
ing insured is, of course, a question of fact, and not hard to determine, 
the more important question, and the one most difficult to decide, 
being, "On whom shall the loss fall?" This question is, we think, 
properly determined by ascertaining whether, under the terms of the 
contract between the parties, the loss in case of fire falls upon the con- 
tractor or the owner of the building In adjusting a loss on such a build- 
ing it therefore becomes necessary, for the time being, to lay aside 



1 1 () SIXTEENTH ANNUAL MEETING OF THE 

the question of insurance and proceed at once to digest and construe the 
contract between the parties ; for this contract must in the end determine 
who shall bear the loss, and he who must bear the loss can, to the extent 
of such loss, recover from his insurer. Of course, when the builders' 
contract definitely fixes the liability of loss by fire upon one party or the 
other, it is unnecessary for me in this paper to discuss the question ; for 
in such a case the contract construes itself, and my remarks, and the 
principles laid down herein, will apply to such contracts as do not in 
well-defined terms fix such liability. 

Then taking up the subject of the respective liability of parties to 
builders' contracts, which do not plainly fix the liability for damage by 
fire, it may be well to state that there are two contracts in use essentially 
different in their operation, to which I especially desire to refer : First, we 
have what might be termed a " joint contract," which may be defined as 
an agreement whereby the contractor agrees to furnish only part of the 
labor and materials, the owner agreeing to furnish a part, such as brick- 
work, painting, stonework or plumbing. Second, an " entire contract," 
under which the contractor agrees to furnish all materials and labor, 
and deliver the building complete in a given time. 

The liabilities of the parties under these contracts differ materially ; 
and, in taking up the consideration of the "joint contract " as described, 
I desire to refer to the decision in the case of Butterfield vs. Byro?i y ren- 
dered as recently as May 19, 1891, in the Supreme Court of Massachusetts, 
and reported in Volume XXVII of the Northeastern Reporter, page 667. 
This case is both interesting and applicable, inasmuch as two promi- 
nent insurance companies were involved in the suit. 

The facts were in substance as follows : Butterfield, the plaintiff, was 
the owner, and Byron, the defendant, was the contractor, of a building 
in course of construction. Shortly before the completion of said build- 
ing it was destroyed by fire. The companies insuring the owner paid 
said owner, and after taking a subrogation of his claim sued the con- 
tractor in the owner's name for moneys paid on account, and for 
damages. 

It appears that under the builders' contract in the case the contractor 
was to contribute certain labor and materials toward the erection of a 
house on the land of the owner. Toward the erection of this house the 
owner was to contribute certain other labor and materials, such as 
painting, plumbing and brickwork, which contributions together would 
make a complete house. The contractor was to be paid for his work and 
material in installments ; and there was nothing in the contract 
definitely fixing the liability for loss by fire on either party. 

In this case it was held that the agreement between the parties was on 
an implied condition, as forcible as though written in the contract, that 
the building should continue in existence, and that, having been 



FIRE UNDERWRITERS' ASSOCIATION. 117 

destroyed, the contractor was not bound to rebuild or replace it, or to do 
anything further under the contract. It was further held that under 
such a contract the contractor may not only retain the money already 
paid him, but that he can recover from the owner such an additional 
amount as will, with the money already received, pay him pro rata 
under his contract for work done and material furnished up to the date 
of the fire. 

This decision virtually places buildings which may be in course of con- 
struction under a " joint contract," as above described, in the same 
category with buildings which may be undergoing alterations and repairs, 
in which case the owner furnishes the original structure, and the con- 
tractor furnishes the labor and the material for the alterations. 

The following decisions bearing directly or indirectly on this subject 
appear to be of similar import : Howell vs. Coufiland, Vol. I. Q. B. 
Div., 258; Cook vs. McCabe, Vol. LIU, Wis., p. 25 ; Clark vs. Franklin, 
No. 7, Leigh, p. 1 ; Clear ey vs. Sohier, 120 Mass., p. 210. 

From the foregoing references, therefore, it appears that under what 
I have described as a "joint contract " the owner is the party who has 
the liability, and therefore the insurable interest, as he not only loses 
the money which he has already paid the contractor, but must also pay 
him for the balance of the work for which no compensation had yet 
been given. 

We do not understand, however, that under the terms of such a con- 
tract the builder has no insurable interest ; but, should he have a policy 
of insurance upon his interest in such a building, he could collect from 
his insurer an amount sufficient to cover his remaining interest at the 
time of the fire, that is to say, the value of the work and labor for which 
he had not already received payment, upon giving the insurance com- 
pany a legal and complete subrogation of his claim against the owner. 
The owner, of course, in such a case could fall back onhis insurers, if he 
has any, for indemnity. 

Now, taking up the consideration of what I have termed an "entire 
contract," that is to say, an agreement wherein the contractor agrees to 
furnish all labor and material, and deliver a house complete according 
to specifications, within a given time, we find the consideration which 
the contractor is to give for the money he is to receive is the delivery of 
the house all completed and as a whole ; and should he deliver anything 
short of a whole and completed house, as required by the specifications, 
his consideration is insufficient, and fails as fully as though he had done 
nothing, the owner being entitled to a return of all money already paid. 

This principle applies, even though the owner under the contract is 

required to pay his consideration in parts, or in installments, it being a 

well-established law that where one contracts to furnish labor and 

material to build, complete and deliver a house, on land of another, he 

F. U. A. 8. 



1 1 < s SIXTEENTH ANNUAL MEETING OF THE 

will not ordinarily be excused or relieved from performance of his con- 
tract by the burning of the building before the time for delivery, even 
though the fire occur through no fault of his. In support of this view I 
desire to call your attention to the following cases: Adams vs. Nichols, 
19 Pick., p. 275 ; Wells vs. Coin an, 107 Mass., p. 514 ; Dermott vs. Jones. 

2 Wall, p. 1 ; School Districl vs. Bennett, 27 N. J. Law, p. 513 ; Thomp- 
kins vs. Dudley, 25 N. Y., p. 272. 

Under an " entire contract," therefore, the owner would lose nothing, 
while the contractor would lose all ; and if the owner has, through an 
excess of caution, taken insurance on his interest in the building, the 
company insuring him can, upon payment of his loss, require a full sub- 
rogation of his claim against the contractor, and in that way recover its 
money either from said contractor or from his bondsmen, who in return 
can call on the company insuring him or them. 

I desire to refer here to a printed form of contract which seems to be 
extensively used on this Coast, and which in the sixth condition, on its 
second page, contains the following extremely awkward provision : ' ' The 
owner shall not in any manner be answerable or accountable for any loss 
or damage that shall or may happen to the said works, or any part or 
parts thereof respectively, or for any of the materials or other things 
used and employed in finishing and completing the same (loss or damage 
by fire excepted)." 

I can find no decisions or court rulings bearing directly upon this 
clause ; and in the absence of such a decision I submitted said clause to a 
prominent attorney of this city, who gave it as his opinion that a court 
of justice would in all probability rule that the wording implied that the 
subject of injury by fire to the building was contemplated and considered 
by the contracting parties, and that it was agreed that the owner should 
assume the risk of such loss. 

In this opinion I fully concur, for it seems to me that, if the clause means 
anything, it means that the contractor shall not be liable for fire damage. 
Should this view be correct (and I think it is), such a contract, notwith- 
standing the fact that in all other particulars it resembles an "entire 
contract," would undoubtedly place the liability for loss or damage by 
fire on the owner, and make him liable in that one respect the same as 
explained in my remarks concerning the "joint contract." 

Now, considering the principles laid down above, and admitting that 
the amount of loss to the assured is the measure of loss to his insurer, we 
can, I think, by applying said principles, readily determine our liability 
in case of fire. Nor do these principles help us only to establish the 
respective liability of the company to the insured, but they will be a 
proper, legal and equitable guide for the apportionment of losses as 
between companies, where both the owner and contractor have insur- 
ance on the same building. 



FIRE UNDERWRITERS' ASSOCIATION. 119 

In closing I desire to say that particular contracts may, and often do, 
have particular and special clauses peculiarly their own. These special 
clauses may alter the liability of either party to the contract, and for that 
matter place them beyond the operation of any general principle. It is 
impossible to lay down a general rule which will fit every individual 
case ; but I think I am safe in saying that all builders' contracts which 
do not contain such special clauses will come properly within the opera- 
tion of the rules and principles above stated. 

BERNARD FAYMONVILLE. 

(Applause.) 

Mr. Wetzlar — I would like to ask Mr. Faymonville a 
question : Does that Supreme Court decision of the State 
of Massachusetts hold that a contract between owner and 
contractor, which provides for specific payments when a 
specific amount of work has been performed, matures 
through a fire, no matter if the work performed at such 
time is less than the amount stipulated for ? 

Mr. Faymonville — That decision holds that the con- 
tractor can recover for work actually done by him up to 
the time of the fire, pro rata under his contract. 

Mr. Wetzlar — If it does hold that when a fire occurs 
the contract matures, no matter w r hat work the contractor 
has done, and he can recover from the owner pay to the 
extent of the work he has performed, would it not seem 
to be incongruous for this reason : a contract in writing 
that provides for the payment of a certain amount, upon 
certain things being done, cannot be reformed by any 
court of justice unless it is ambiguous. If there is 
nothing in the terms of that contract providing that the 
contract shall be matured by fire I doubt if such a prop- 
osition would hold in this State. 

Mr. Faymonville— Allow me to state, as I suggested in 
my paper, that the case was one where the owner of the 
lot was to furnish part of the material and part of the 



120 SIXTEENTH ANNUAL MEETING OF THE 

work, and thus place the building in the same category 
with a building being repaired ; and you have got to 
pay the contractor under that decision for such work and 
material as he has performed up to the time of the fire. 

Mr. Wetzlar — Do you imagine that that decision w^ould 
hold in an individual contract, or w r here there was no 
joint ownership in the work performed, or in the material 
furnished ? 

Mr. Faymonville — I simply state the case as I find it. 

Mr. Wetzlar — I was making the inquiry, not for the 
purpose of criticising the Supreme Court of Massachu- 
setts, but whether your deduction w 7 as the true inference 
to be drawn from the decision, or whether there are some 
other points in that decision, or even in the contract, 
which you might have overlooked. 

Mr. Faymonville — Well, the decision is very full, and I 
would be very glad to have any of you refer to it and 
read it over yourselves and see what conclusions you 
arrive at after reading it. 

Mr. Wilson — Mr. President, can we not avoid all 
questions of this kind by drawing our contracts prop- 
erly ? 

The President — Mr. Faymonville refers to a very ambig- 
uous clause that w r e find in the building contract in use 
on this Coast. 

Mr. Wetzlar — I know Mr. Faymonville' s fairness so well, 
in the treatment of all subjects he investigates, that I con- 
fess that the only thing which struck me as peculiar about 
this Supreme Court decision was the fact that an explicit 
contract in writing, accepted by both parties, — where 
the minds of both parties had met, — should be construed 
in a different shape from what it was expressed in writing 



FIRE UNDERWRITERS' ASSOCIATION. 121 

by even a Supreme Court. That was the only point 
which I did not quite catch. 

Mr. Watt — I was just going to remark that Mr. Wil- 
son was about to make a suggestion in reference to the 
policy form that might be valuable, and the President 
answered him rather shortly. I would like to hear what 
Mr. Wilson has to say. 

The President — I wish to explain to Mr. Wilson that 
I thought he referred to the building contract which we 
had been discussing. We would be very glad to hear 
from him. 

Mr. Wilson — I have read a great many of those decis- 
ions of the courts, and I have about made up my mind 
that I could avoid any controversy of that kind by get- 
ting my contract up as I thought about right. We are 
using a form in my office which I prefer. I usually issue 
a joint policy in the name of the owner and contractor, 
with loss, if any, payable to the contractor or the owner, 
as may be determined afterwards, according to the inter- 
est they may have. 

Mr. Faymonville — Mr. Wetzlar just spoke of the 
courts reforming a contract. I do not see that they have 
done any reforming in this case. They have merely 
established the liability of the respective parties for any 
loss by fire, which the contract itself does not establish 
in plain terms. 

Mr. Wetzlar — That is exactly the point T have been 
trying to draw out from Mr. Faymonville, — which of the 
parties had an insurable interest. Each party to the 
contract assumed a certain amount of liability. In your 
paper you come in saying that under the contract the 
owner can recover from the insurance company his 



122 SIXTEENTH ANNUAL MEETING OF THE 

overplus for work under such building contract. If he 
could not, would he be liable to the contractor for any 
overplus? 

Mr. Faymonville — That is on the entire contract. 

Mr. Wetzlar — The owner, then, under an entire con- 
tract, by taking insurance, is virtually taking insurance 
against the liability of the contractor or his bondsmen; 
that is what it amounts to, because he can collect from 
the company, and then the company being subrogated 
can collect from the contractor or his bondsmen. 

The President — I think the keynote of Mr. Faymon- 
ville's remarks is that liability and loss of the assured is 
the liablity and loss of the company, our remedy being 
in certain cases subrogation to whatever rights our par- 
ticular claimant may have against the other one. I do not 
think there can be any question about the conclusions 
that Mr. Faymonville has arrived at in his paper. With 
the decision of the court as to the liability of the different 
parties, we have hardly got much to do. After the courts 
have decided that certain parties are the sufferers then 
our policy I think would apply, and follow the loss of 
the assured. That was the point Mr. Faymonville wished 
to make. 

Are there any other remarks on this very important 
and interesting subject? 

Mr. Wilson — I would like to ask, Mr. President, if 
Mr. Faymonville holds that a company is responsible 
although they may issue the policy to the owner 
on an entire contract with the contractor; in other 
words, if the policy is issued to the owner upon an 
entire contract with the contractor, is the company 
liable in case of loss? 



FIRE UNDERWRITERS' ASSOCIATION. 123 

Mr. Faymonville — On that point the decisions don't 
seem to dwell ; but I asked Mr. Van Ness about it. He 
seems to think that the company would be liable; that 
the question asked the assured would be, " What have 
you lost?" and the company would have to pay him 
the amount and take a subrogation of his claim against 
the contractor, and collect from him or from his bonds- 
men. 

The President — That would be consequential damages? 

Mr. Faymonville — I don't think so. 

Mr. Wetzlar — In case the owner of a building in course 
of construction had a contract with the contractor that 
no payments were to be made until the entire building 
was delivered, — I don't see what insurable interest a 
prospective owner would have. 

The President — I wish to call Mr. Wetzlar's attention 
to the fact that the owner of the building has already 
made several payments on it. 

Mr. Faymonville — Of course, if the owner had never 
paid a cent on the contract, I do not believe he would 
have an insurable interest; he would have nothing to 
recover for. 

Mr. Kinne — Mr. President, I would like to ask, as I 
did not have the pleasure of listening to the paper, 
whether Mr. Faymonville suggested any remedy for the 
existing trouble in his paper ? 

The President — Mr. Faymonville can better answer 
that question. 

Mr. Kinne — Simply yes or no. 

The President— Under that particular clause in the 
contract in general use on the Coast ? 



124 SIXTEENTH ANNUAL MEETING OF THE 

Mr. Kinne — About that, — does Mr. Faymonville sug- 
gest any remedy ? As you are aware, Mr. President, the 
question as to liability between the owner and contractor 
was considered by several companies during the past 
year, and I had something to say about it in the way of 
acting as an umpire between respective interests of that 
character ; * and I suggested to the contractors — they 

* STATEMENT OF THE CASE. 

Owner contracts with builder to construct a dwelling-house for $4,833. 
Owner during progress of the work pays to builder, on architect's cer- 
tificate of acceptance, $3,000 Building was practically finished and 
waiting architect's inspection for final certificate and consequent pay- 
ment, when a fire occurs, damaging the property to the extent of an 
agreed amount of $550. The builder had an unpaid interest of $1,833 
in the property at the time of the fire. Among other conditions of the 
contract the following article appears in an ordinary printed form, viz.: 
11 The owner shall not be liable or responsible for any accident, loss or 
damage happening or occurring to the work specified in the within con- 
tract prior to the completion of the same (loss or damage by fire or 
earthquake excepted) ." This contract has been used in San Francisco for 
years, and Company A insuring the owner contends that the custom has 
been that the builder should stand first loss, or all loss above the progress 
payments. Company B, insuring builder, contends that regardless of 
such custom, if true, such method is wrong and incorrect, and that the 
proper adjustment of the loss is for Company A and Company B to share 
the loss in such proportion as their respective insurances bear to the 
loss. 

DECISION. 

Appreciating the fact that some weight may be given to the decision, 
and which possibly may be referred to in future similar cases, I have 
endeavored to give due consideration to the merits of the points at issue, 
and think it best to explain briefly my reasons for arriving at the result. 

The consideration is, first, whether the owner or the builder shall 
suffer a loss under the contract. The insurance cuts no figure until this 
is ascertained, but then comes in to indemnify the insured to the extent 
of the loss under the policy. The owner, under the contract, is not 
liable for certain losses or damages, such as rain damaging plastering, 
windows being broken, building falling or being blown down by wind, 
etc., but is liable for " loss or damage by fire," and the query is, to what 
extent ? In this case the owner has $3,000 invested in the building, 



FIRE UNDERWRITERS' ASSOCIATION. 125 

have an organization — that they should change the old- 
fashioned, misunderstood contract that they have, and 
one which they all said themselves they did not intend 
to have worded as it is. It is an old so-called Bancroft 
form, which has been handed down from ancient history 
to the present ; and they desire that they may be able 
properly and in a straightforward manner to insure their 



and the contractor has $1,833 invested, that sum being the value of his 
labor and material yet unpaid for. Supposing the building were entirely 
destroyed, would each lose the several amounts stated and then the 
insurance companies be called on to idemnify their policy-holders to 
that extent, or till their policies were exhausted ? If so, as the owner- 
ship in the building is joint and undivided, any damage cannot be 
segregated ; and it would seem that the partial loss of $550 would be 
divided, in case no insurance has been affected by either, into such parts 
as their respective interests demanded, just the same as it would be in 
case it was a total loss of $4,833. No priority of damage would be 
equitable in a partial loss any more than in a total loss. The fire burned 
indiscriminately the property of both the owner and the builder, and 
the loss should be apportioned as their several interests may appear. 

It is either this, or the owner, under the contract, is wholly "liable 
or responsible for any loss or damage by fire;" but, with the contract 
before him, your referee must decide in this case that it does not mean, 
nor is it intended to mean, that the owner is responsible for any loss 
other than to himself and upon the interest he may have secured by 
certain payments ; and to that extent only is it intended to and does 
relieve the builder from responsibility. In furtherance of this position 
it is noted by your referee that in the contract all its articles of agree- 
ment are by and between certain parties, except the one above quoted. 
In all the others the architect agrees to do certain things for the owner 
and for the contractor, or the contractor agrees to do certain things for 
the architect and the owner, or the owner agrees to to do certain things 
for the architect or the contractor. The quoted twelfth clause is void of 
any agreement between them, and is construed to mean that the owner 
is simply made liable for any damage happening to his interest in the 
building, thus relieving the builder to that extent, and which naturally 
must be in proportion to the ascertained joint ownership of the two 
parties. There is no penalty attached to the clause for noncompliance 
with it. The owner gives no bonds to the contractor to carry out any 
fancied protection to him in case of fire or earthquake, while that 
which the contractor agrees to do can be enforced by appealing to his 



126 SIXTEENTH ANNUAL MEETING OF THE 

interest as contractors over and beyond what they have 
received from the owner, and the owner can have the 
privilege of insuring his interest up to the point to 
where he has made payments. This was presented to all 



bondsmen. It is very evident what the intention is, and it must guide us 
in considering the case, believing that had the article in the agreement 
been intended to compel the owner to protect his own interest, and also 
that of the builder against loss, it would have so stated, and then oniy 
would his interest have been entire and beyond his payments. Inter- 
views with several architects and many builders have convinced me that 
both of the contracting parties consider their interests are simply what 
they have invested in the building ; that the contract is always so under- 
stood, and hence insurance against fire is usually had by both parties to 
protect their interests. The phraseology is taken from the old Bancroft 
form of contract printed ten or twelve years ago. The Builders' 
Association was formed some years later, and they adopted the form 
about three years ago, without thought as to the possible legal interpre- 
tation of the wording of the clause in question. 

Had there been no article of agreement making the owner liable for 
loss on his personal interest, I should say that the whole loss must be 
borne by the contractor, as the owner could simply wait for the agreed 
certificate from the architect before he paid anything further, and fall 
back on the contractor's bondsmen for the coin already paid, in case he 
did not proceed to construct and deliver over the building as planned 
and agreed upon, and that the clause was simply inserted to prevent 
this. 

Summing up the case at hand I find that the owner owns only what 
he has paid for, and must lose $3,000-4,833, and the builder $1, 833-4, 833, 
of the $550 damage by fire, which amounts to the following sums : 
owner $341.40, builder $208.60, and that Companies A and B pay these 
respective sums to their policy-holders. 

I should decide the same should the loss have been, say, three times 
as great, and the builder's proportion $625.80 and his insurance but $500, 
in which case he would suffer an actual unindemnified loss of $125.80, 
and that Company A could not be called on to float over and make it 
good. If the builder does not see fit to protect his unpaid interest in 
the property he is constructing, and a fire occurs, he must suffer loss 
just the same as any one who thinks it proper or profitable to become 
his own insurer. I do not believe that there is a court in the land, with 
the intentions of both parties made as clear as I find it in this case, and 
with the custom and usage of twenty years to substantiate the assertion, 



FIRE UNDERWRITERS' ASSOCIATION. 127 

of them. They saw that the contract was not in accord- 
ance with their intentions, and yet they said they had 
a large number of them on hand. It would cost three 
or four hundred dollars to have a new lot printed, and 

that would decide on any other basis. With an established liability like 
this, the adverse interests of insurance companies should not intervene 
to change or corrupt good practices ; but they can point out ways of 
making the contract clear. 

The impropriety, and I might say the almost absurdity, of having Com- 
pany B pay first and Company A afterwards is at once evident when we 
consider that, by that method, had the builder not insured at all the 
entire loss would be thrown on Company A, or, had he taken out a 
larger policy than he did, that he would then be reducing Company A's 
liability. The principle contended for, that the apportionment should 
be based on insurance to insurance, is not tenable ; for, as their interests 
are not regulated by insurance, their losses cannot be, and the company 
only proposes to indemnify them against loss. Again, it would cause the 
owner and the builder and the two insurance companies to see that the 
other had insurance and plenty of it ; whereas, on the basis of the sev- 
eral ownerships as above stated, the contracting parties protect them- 
selves with insurance or pocket their loss without attempting to float it 
over on the other, all of which is fair and proper, is based on a prinicple 
which is unchanging, and depends on facts which can be ascertained by 
disinterested parties. 

Believing that contracts are made to be plainly understood, and not to 
befog the contracting parties, I recommend that companies insuring 
either the owner or contractor's interest in a building in process of 
erection should see that the clause in the contract relative to responsi- 
bility for loss, etc., should be expressed more fully, and possibly as fol- 
lows, which is suggested as a proper form to cover the ground: "The 
owner shall not be liable or responsible for any accident, loss or 
damage happening or occurring to the works specified in the within 
contract prior to the completion and final acceptance of the same, 
with the exception of loss or damage by fire or earthquake, in which 
event he shall be liable with the contractor in such proportion as his 
payments shall bear to the excess value of materials and labor yet 
unpaid for." 

It is not well to have to fall back on usage ; and the above would 
plainly state what the usual clause actually means, and something should 
be adopted to avoid any possible controversy. 

C. Mason Kinne. 



128 SIXTEENTH ANNUAL MEETING OF THE 

they did not see how they could fix it ; they would 
gladly do so if somebody would get out a new lot of 
contracts for them. Now, this paper having been read 
here, and the matter presented as it was some months 
ago by myself to all the members of that association of 
contractors, if this association could take some such 
steps as would bring the matter more prominently before 
the contractor's association they would gladly change 
their form. They do not want to have any litigation in 
the courts between their respective interests, and did not 
at that time ; and that is one of the things that this asso- 
ciation might do, and in the way of recommendation 
to them from an organized body, instead of the indi- 
vidual ideas of one, as mine were in that case to them, 
see the greater improvement. If we can get them to so 
frame a contract with the owner that there can be no 
misunderstanding of their respective interests, and 
knowing that they are entirely separate, then we can 
see that, based upon a contract like that, the company 
that represents the interest of the owner, and the com- 
pany that represents the interest of the contractor, 
never could clash. They would settle their respective 
losses without difficulty. 

Mr. Faymonville — I think the suggestion of Colonel 
Kinne is a very good one. If the association would try 
and get up a clause to be inserted in the builders' con- 
tracts it would save us considerable trouble. In my 
paper I merely tried todefine the legal status of the various 
parties and therefore of the companies themselves. 

Mr. Kinne — I will suggest a form this afternoon, — I 
have not it here, — the same form that I suggested before 
the contractors' association in the case referred to some 
months ago. 



FIRE UNDERWRITERS' ASSOCIATION. 129 

The President — I was going to make the request of 
Colonel Kinne that he frame some sort of a resolution to 
present to the association this afternoon for adoption. 

Mr. Kinne — I will gladly do so. As George Grant 
says, — anyting to bring good into the business. 

Mr. Watt — I move that a committee of three be 
appointed to see that the matter is properly brought 
before the contractors. There is where we want to start. 

The President — That is a very good suggestion of Mr. 
Watt's ; but had we not better defer the appointment of 
the committee until the resolution is decided upon ? 

Mr. Watt — I had no idea but Colonel Kinne would 
bring it. 

The President — The appointment of a committee comes 
after the resolution. 

Mr. Carpenter — I was about to make the same sug- 
gestion that Mr. Watt did, and would like to second the 
motion that a committee of three be appointed to confer 
with the contractors and see if a form cannot be agreed 
upon ; and, while it is unusual for any one to nominate 
a committee except the President, I would like very much 
to suggest that Colonel Kinne, Mr. Wetzlar and Mr. 
Faymonville be put on that committee. 

The President — A very excellent committee. 

Mr. Watt — I second that motion. 

The President — You have heard the motion, that a 
committee of three be appointed to confer with the con- 
tractors' association. All in favor will signify in the 
usual manner. Carried. 

I will appoint on that committee Messrs. Kinne, Wetz- 
lar and Faymonville. The resolution, it is understood, 



130 SIXTEENTH ANNUAL MEETING OF THE 

is to be presented this afternoon by Colonel Kinne as he 
originally promised. 

Mr. Kinne — I do not understand that. 

The President — As I understand the motion, the com- 
mittee is appointed to present a resolution to the con- 
tactors' association, or architects, or builders, whoever 
they are, for their adoption. 

Mr. Watt — Mr. Chairman: If I may be pardoned for 
my remarks, I submit I would rather a good deal take the 
action of these three gentlemen after they have spent ten 
days or two weeks on this matter, than to take the action 
of this whole assembly after fifteen minutes discussion. 

The President — There is one thing I wish to mention, 
Mr. Watt, that this subject has been before some of us 
and before Colonel Kinne for some six months ; and I 
have no doubt that every member of the committee has 
fully digested the subject and made up his mind as to just 
what he wants to recommend. It is not a new question 
with them. When the resolution is presented here then 
we can take such action as we see fit. 

The next paper before us is one by Mr. Driffield, 
Garnishments Before Proofs. I only received this paper 
this morning by mail from Los Angeles. I tried several 
members to see who would read it ; but, as it is not type- 
written, I failed to find any one who would consent. 
Therefore it devolves upon me, and I will do the best I 
can with it. 

GARNISHMENTS BEFORE PROOFS. 

There was submitted for the consideration of the last annual meeting 
of this association, a paper written by Mr. Peter Winne of Denver, 
entitled, ''Attachments or Garnishments Before Proofs Are Made," 
wherein the writer took the ground that the garnishment of a claim for 
loss under a policy would not legally hold, unless proof of loss had been 



FIRE UNDERWRITERS ASSOCIATION. 131 

made by claimant prior to such garnishment. To this view considerable 
exception was taken in the course of the discussion following the reading 
of the article, and during which I sided with the views expressed by the 
writer. 

Upon being later requested by our energetic, and, in my case, ill-advised 
President, to prepare a paper for this meeting, I blindly consented, think- 
ing that I might amplify the doctrine laid down by Mr. Winne, and 
fortify his position by decisions of the courts bearing upon the subject. I 
had fully intended to devote some time and research to the subject, but 
the " thief of time " and adverse circumstances, in the shape of recent 
country losses requiring my personal attention, have placed me in the 
mortifying position of being compelled to acknowledge that, at the 
eleventh hour, I am far better qualified to expatiate upon the evils of 
procrastination than upon the subject chosen by me. 

Two evenings were devoted by me during the first week of this month 
to some preparation of the subject in the office of one of our leading 
attorneys, who gave me the freedom of his library, and who consented to 
pass judgment upon the conclusions at which I should arrive after my 
investigations. Unfortunately he will be denied the opportunity of 
increasing his stock of legal lore by the perusal of what would undoubt- 
edly have proved a valuable addition to the acknowledged authorities 
upon the subject in question, as, after having made copious notes of 
decisions cited in the California Reports, it was necessary for me to leave 
San Francisco on loss matters ; and I find myself on this Sabbath evening 
stranded in Los Angeles, without my notes or the assistance of any data, 
endeavoring to conjure up a make-shift paper to be read before you on 
Tuesday next. I feel that it will be a gross injustice to inflict upon you 
the reading of my crude remarks, but bearing in mind the utter impos- 
sibility of my returning to San Francisco, and of meeting the scornful 
gaze of Mr. Lowdeu without having endeavored, in some manner, to 
redeem my promise to him, I will make a few remarks upon the subject 
chosen by me, which I trust will be received with suffrance, and taken 
as evincing a well-meaning disposition on my part. At all events I am 
too far away to be in physical danger of your wrath, and will take my 
chances of being subjected to your raillery upon my return. 

Before proceeding to strictly consider the subject in question, it may 
be as well to, in a general way, touch upon the nature of an attachment 
or garnishment. This information can, of course, be gleaned from the 
Code of Civil Procedure by any one interested in the subject ; but, as that 
highly edifying and sensational work is considered by many of us too 
frivolous for perusal, the information about to be given (second-handed) 
may prove to some both new and interesting. 

An attachment or garnishment is a legal process by which the property 
of a defendant may be seized and held as security for the satisfaction of 



132 SIXTEENTH ANNUAL MEETING OF THE 

any judgment that may be recovered by the plaintiff. This remedy of 
attachment is given only in cases of indebtedness arising upon contract, 
express or implied, for the direct payment of money made or payable in 
this State, and is an auxiliary and not a distinct proceeding. Should 
indebtedness be secured by mortgage or lien no attachment can issue. 
The writ of attachment is issued by the clerk of the court upon the filing 
of an affidavit by the plaintiff showing that defendant is indebted to him 
in a specific sum, and upon a written undertaking being filed by plain- 
tiff, in a sum not exceeding the amount claimed by him, to the effect 
that, in the event of defendant securing judgment, plaintiff will pay all 
costs and damages sustained by defendant by reason of such levy. This 
writ is directed to the sheriff of any county in which the defendant may 
possess property, and requires him to attach and safely keep all the 
property of such defendant within his county, not exempt from execution, 
or so much thereof as may be sufficient to satisfy plaintiffs claim. In 
lieu of the levying of such writ, the sheriff may accept a proper under- 
taking from the defendant in an amount sufficient to satisfy such demand 
and costs, or equal to the value of the property about to be attached. 

Upon receiving from the plaintiff information that any person has in 
his possession any credits or other personal property belonging to the 
defendant, or is owing any debt to defendant, the sheriff must serve upon 
such person a copy of the writ, with a notice that such credits, property, 
or debt are attached in pursuance of such writ. Upon such service all 
persons having in their possession any credits or other personal prop- 
erty belonging to the defendant, or owing any debt to the defendant, 
shall be, unless such property be delivered up or transferred, or such debt 
paid to the sheriff, liable to the plaintiff for the amount thereof, until the 
attachment be discharged or any judgment recovered by him be satisfied. 

The garnishee may be required to attend before the court or judge, or 
a referee appointed by either, for the purpose of examination upon oath 
respecting the property garnished. The sheriff, at the time of the service 
of the writ, must request the party owing the defendant to give him a 
memorandum stating the amount and description of such indebtedness, 
and if such memorandum be refused he must return the fact of such 
refusal with the writ. The party refusing to give the memorandum may 
be required to pay the costs of any proceedings taken for the purpose of 
obtaining information respecting the amount and description of such 
debt or credit. 

If the defendant recover judgment against the plaintiff, all the prop- 
erty attached must be delivered to the defendant, and the order of attach- 
ment shall be discharged and the property released therefrom. 
Proceedings to discharge or release the garnishment may be instituted 
by the defendant, and an order to that effect made upon certain con- 
ditions set forth in sections 554, 555 and 556, C. C. P. 



FIRE UNDERWRITERS' ASSOCIATION. 133 

Attachments are released by the operation of law in the following 
cases : 

A petition in insolvency dissolves attachments levied within the statu- 
tory time (Baum vs. Raphael, 57 Cal., 361). The order directing notice 
to the creditors, and the adjudication in insolvency, dissolves the attach- 
ment (Cerfws. Oaks, 59 Cal., 132). Judgment for defendant, ipso facto, 
dissolves the attachment (0 } Connor vs. Blake, 29 Cal., 316). The death 
of the defendant dissolves the attachment (Myers vs. Molt, 29 Cal., 367," 
and various other decisions). The release of an attachment by an attach- 
ing creditor or his attorney is valid without any order of court (Smith vs. 
Robinson, 64 Cal., 387). 

Having, in a general way, briefly treated of the process of garnish- 
ment and its effect, it is now time to consider the law on the subject, in 
relation to the claim of an assured under a policy, where such claim has 
been levied upon by an attaching creditor. Before proceeding further, 
however, I wish to distinctly express my conviction that garnishments 
levLd prior to proofs having been filed (except where a waiver of proofs 
has been made) are of no legal value or effect ; and I trust and expect to 
be able to demonstrate the correctness of mv views by the citation of 
decisions bearing upon the subject. 

We are all agreed that, except in cases of waiver, the filing by the 
assured, after a fire, of proofs of loss, is a condition precedent to recovery 
under the policy. Until such necessary action is taken there is no legal 
knowledge on the part of the company of any of the facts required to be 
set forth in proofs of loss, and assuredly there is no claim before the 
company. No debt has matured, or can mature, until the valid and well- 
sustained conditions precedent to recovery are fully complied with. 

The section of the C. C. P. under which insurance companies are 
attached reads as follows : " Debts and credits and other personal prop- 
erty, not capable of manual delivery, must be attached by leaving with 
the person owing such debts, or having in his possession or under his 
control such credits and other personal property, or with his agent, a 
copy of the writ, and a notice that the debts owi?ig by him to the 
defendant, or the credits and other personal property in his possession 
or under his control, belonging to the defendant, are attached in pursu- 
ance of such writ." Can it be in any manner claimed that, prior to the 
filing of proofs by an assured, the company is " owing such debts," or 
that it has in its possession any credits "belonging to the defendant? " 
The language of the statute seems to me distinct and definite, and to 
scarcely need any bolstering by decisions. 

As my time is very limited, and I have a very short while in which to 
post this paper, I trust the members will excuse the want of order and 
consecutiveness in the quoting of decisions. 

F. U. A. 9. 



134 SIXTEENTH ANNUAL MEETING OF THE 

As bearing me out in my views upon the subject I beg to submit 
the following decisions : 

Before any party to a contract can require another party to perform 
any act under it he must fulfill all conditions precedent thereto 
imposed upon himself (Civil Code, sec. 1439 ; Parsons on Contracts, 5th 
ed., p. 520; Dermott vs. Jones, 2 Wall., U. S. I.; Oakley vs. Morton, 11 
N.Y., 25). 

Where goods were fraudulently purchased by an insolvent the debt is 
deemed equitably due at once, though not so by its terms, and the credi- 
tors may attach {Patrick vs Montader, 13 Cal., 441). ' Ergo, if the 
transaction had not been fraudulent, attachment could not issue; and the 
doctrine was laid down by the Court in this case that ' i an attachment 
issued before the maturity of the debt is prima-facie void as against a 
subsequent attachment." 

The court, in its decision in Hathaway vs. Davis, 33 Cal., 165, holds 
that the words "direct payment of money," in section 537, C. C. P., 
implies that the debt must be liquidated before attachment can issue. 

In Hassie vs. G. I. W. U. Cong., 35 Cal., 386, it was held that the 
test of the validity of an attachment is whether defendant could main- 
tain against the garnishee an action of debt. If so, the liability is 
attachable, but not otherwise. (No action would lie before proofs were 
filed, and consequently claim of assured against company is not suscep- 
tible of being garnished. In the same case it was held that an equitable 
demand cannot be garnished : garnishment reaches only legal debts 
which the defendant in the attachment could enforce in his own name. 

In Norris vs. Burgoyyie, 4 Cal., 409, it was held "that a garnishee can 
be required only to answer as to his liability to the defendant at the time 
of the service of the garnishment, and that the garnishment is an attach- 
ment of existing debts, and what does not exist cannot be attached. 

In Early vs. Redwood City, 57 Cal., 193, it was held "that, to attach 
tangible property or garnishee a credit, it is essential that the property 
or credit exist," and further that, "if defendant has assigned all that is 
due him under a contract with the garnishee, the garnishment reaches 
neither that which has been assigned nor that which will become due on 
further performance under the contract." 

It is held in Gregory vs. Higgi?is, 10 Cal., 339, that the indebtedness 
of the maker of a note before its maturity is not attachable. 

I think I have cited sufficient decisions to fully sustain my views pre- 
viously expressed. The cases above referred to of Hassie vs. G. I. W. U. 
Cong., N'orris vs. Burgoyne, and Early vs. Redwood City, are particu- 
larly strong and distinct ; and they appear to me to fully establish the 
doctrine that "in order to be attached the debt must be legal and not 
equitable, it must be payable in money, and it must be due at the time of 
service of process. ' ' 



FIRE UNDERWRITERS' ASSOCIATION. 135 

As there was some discussion at the last meeting as to the question of 
valid service of writ of attachment I might add that it has been held in 
Kennedy vs. H. S. & L. S., 38 Cal., 153, that, "to render the process 
of attachment effectual against a corporation, as garnishee, the writ and 
notice must be served on the president or other head of the same, or the 
secretary, cashier or other managing agent thereof.'' Service of process 
on teller of bank was held as insufficient to bind the corporation. The 
words of the court are, " We hold, therefore, if service be made on the 
4 agent ' of a corporation, it must be on the managing agent." Under 
this construction, service upon a " special " or adjuster cannot be effectual 
as against the company. 

We have all experienced Considerable worry and annoyance due to 
the filing of attachments, and as a rule the same are levied prior to proofs 
having been filed. In such cases I strongly advise a return being made 
of "nothing owing," and the ignoring of any claim on the part of the 
garnishor. At all events, should it not be deemed policy, I contend to 
have shown it to be a position we can safely and legally take. 

I regret that I have been unable to handle the subject intrusted to me 
in the manner I would have liked. There is a deal more concerning 
garnishments which would have proved of use and of interest, but time 
will not permit any further elaboration of the subject ; so, with sincere 
regrets for my absence, I wish you all food and reflection for the coming 
year, and the best of good times at the banquet. 

V. CARUS DRIFFIELD. 

N. B. — The food will come on Wednesday night, — reflection in the 
morning. V. C. D. 

(Applause.) 

The President — We have upon the same subject a paper 
by Mr. Wetzlar, which perhaps it would be well to read 
following the one by Mr. Driffield ; and, if there are any 
comments to make, we can make them on both at the 
same time. 

ATTACHMENTS OR GARNISHMENTS BEFORE PROOFS OF 
LOSS ARE MADE. 
When, in selecting this topic as a subject for my paper at this annual 
meeting, I learned from our worthy President that our friend D riffield 
had for some time past designated this as the topic upon which he desired 
to write, I confess that I was almost inclined to seek another subject. 
But through good nature I yielded to the persuasive powers of our Presi- 
dent to inflict upon you a double edition, as it were ; and when I further 



136 SIXTEENTH ANNUAL MEETING OF THE 

learned from friend Driffield himself that he had this topic under serious 
consideration for almost a year, whereas I only had selected it a couple 
of weeks ago, I felt as though nothing I could add could further enlighten 
you. Not knowing, however, what hypothes s of reasoning my friend 
Driffield is to advance in support of his argument, I am rash enough to 
presume that my poor arguments will be but cumulative, and perhaps 
uninteresting. For the sake, therefore, of making my promise good, 
and with no intent to foist upon you a labored production, I will delve 
into this subject regardless of what any one else may have said in said 
matter. 

When the elegant production of our esteemed friend Peter Winne was 
read at our last annual meeting, I saw fit to express myself in a vein con- 
trary to many of the ideas expressed by that distinguished author, but 
was diplomatic enough to say that the topic was one that could not be 
extemporaneously discussed, and would require deep study. I can only 
confirm expressions I then made, for the deeper I look into the subject 
the more satisfied do I become that it is full of incongruities. 

To simplify the object of this paper, and to place it more readily within 
the understanding of the layman, I will subdivide the proposition at 
issue, namely, whether an attachment or garnishment upon an insurance 
company before a proof of loss is filed with such company is legal, into 
the following subdivisions, to wit : The contract and the contracting par- 
ties ; the rights of the parties ; the process ; the laws governing the par- 
ties upon whom process should be served ; and the author's suggestion 
for remedy. 

THE CONTRACT AND THE CONTRACTING PARTIES. 

The contract of insurance as applied in an insurance policy is "mono- 
mastic ;" in other words it is a contract signed by the corporate officers 
of an insurance corporation, and accepted by the insured upon the terms 
and conditions set forth therein It is implied, for this contract to be 
legal, that, like in other contracts, the minds of the contracting parties 
have met as regards the object ; and it is presumed in law that the accept- 
ance of such monomastic contract or policy is an acceptance and agree- 
ment by both parties to faithfully carry out and fulfill the several 
conditions, as chronicled therein. A violation of the conditions by either 
party as contained in such contract would render the contract void ; and 
many companies, appreciating the importance of this condition, indorse 
their policies in large type on the outside with f " Read your policy." 

THE RIGHTS OF THE PARTIES. 

Under the New York standard form of policy the insurer is liable to 
the insured to the extent of his policy, not exceeding at any time the actual 
cash value of property at the time a loss or damage occurs ; which 



FIRE UNDERWRITERS' ASSOCIATION. 137 

contract also specifies that it will be payable sixty days after due notice, 
ascertainment, estimate and satisfactory proofs of loss have been received 
by the insurer, in accordance with the terms and conditions of his policy. 
It would therefore seem, upon the actual face of this proposition, that a 
claimant against an insurer could not recover payment for any agreed or 
determined amount of loss in less time than sixty days after receipt of 
satisfactory proof of loss by the insurer under the contract. But nowhere 
can a standard be found of record to establish what may or may not be 
considered satisfactory proofs by all insurers ; and as a result such ques- 
tion could at all times be submitted to the adjudication of a court. If 
an insured at a time of loss should unfortunately be indebted to other 
parties, and these other parties saw fit, in order to protect their accounts, 
to garnishee or attach the insurer, they would naturally have only the 
same legal rights of recovery against the insurer that the insured enjoys, 
and, in so becoming a plaintiff in an action against the insurer, would 
not be entitled to any payment uuless the terms and conditions of the 
contract, even to the fulfillment and execution of satisfactory proofs of 
loss, had been carried out. 

To attach a claim against an insurance company before the proofs of 
loss are filed cannot necessarily be construed as premature, as in many 
instances an attachment is not an action for the recovery of a debt, but 
may be a bill of discovery (see Phenix Insurance Company vs. Willis, U. S. 
Circuit Court, Texas, p. 24). It is true, however, that compliance with con- 
ditions of a policy as to proofs of loss are a condition precedent to liability. 
If, therefore, at the time process of garnishment was served, the insurer 
has waived execution of proofs of loss, then an action could be main- 
tained. This also would hold good regarding the conditions of arbitra- 
tion (see Lovejoy, et al. vs. Hartford Fire Insurance Company, U. S; 
Circuit Court, Texas, Ins. Law Journal, Vol. XI, p. 167). 

A claim clearly and properly ascertained by arbitrators is subject to 
attachment, the same as if it were a specific sum due upon a bond given 
by the insurer to the insured (see Bayle vs. Franklin Fire Insurance 
Company, Supreme Court of Penn., March term, 1844). 

Any judgments against the insurer as garnishee by creditors of the 
insured are invalid when not accompanied by a judgment against the 
debtor ; and such judgments cannot be set up as a defense by the 
insurer on the ground that the assignment was in fraud of the creditors, 
in a suit by the assignee of the insured (see Horst vs. City of London 
Fire Insurance Company, Supreme Court of Texas, Ins. Law Journal, 
Vol. XVIII, p. 452). 

An insurance company, therefore, cannot set up in defense of an 
action on a policy by the assignee of the assured that the assignment 
was in fraud of the assignor's creditors, where no final judgment is 
shown to have been obtained against the assignor. 



138 SIXTEENTH ANNUAL MEETING OF THE 

The fact that his creditors have obtained judgment against the company 
as garnishee is insufficient, as judgment against a garnishee is invalid 
without judgment against the debtor (S. W. Reporter, p. 148, April, 1889). 

The question that seems to agitate the minds of insurance men in 
general is apparently a proposition that there is nothing due an insured, 
who has sustained loss and damage by fire, until after proofs of loss have 
been filed and accepted as satisfactory by the insurer. Our friend Winne 
even goes so far as to claim that any other ground than this would be 
illogical and unreasonable. A contract of insurance specifies a promise 
to pay, not in excess of a certain sum, upon the happening of a loss by 
fire. This contract, therefore, matures whenever such loss by fire has 
occurred. It is an implied contract upon payment of money, and under 
the laws of the State of California may be attached as security for the 
satisfaction of any judgment. The condition precedent that certain 
things must be done and performed by the assured after the happening 
of the fire, in order to prove up his loss, and that the insurer then has 
sixty days in which to pay such loss, can in no manner be construed as 
an estoppel of the rights of a creditor of the insured ; for, were this so, 
it would be against public policy and morals, as the insurer and insured 
could elect to conspire and defraud such creditors. 

It is an undeniable fact that, upon the occurrence of a fire, the com- 
pany having the risk either owes the insured the amount necessary to 
indemnify, to the extent of the policy, or owes him nothing, the estab- 
lishment of such liability being verified by subsequent proofs of loss ; 
but our friend Winne loses sight of the fact that a garnishment filed is 
simply a levy to pay money (then in hand due or owing the insured) to 
the attachor in place of the insured, and therefore, should no moneys be 
due or owing, a garnishment would of itself necessarily fall. In this 
connection the process as in vogue in California is to the effect that 
the garnishee shall not pay over or transfer to any one else but the 
garnishor any moneys, goods, credits, effects, or debts due or owing, or 
any other personal property in his possession or control, belonging to 
the defendant named in the writ of attachment. 

To establish liability, friend Winne contends that an adjustment must 
be had ; and, if this is true reasoning, could the company, by refusing to 
make an adjustment, waive its liability? No court of law would so hold. 

All policies provide that an assured should give immediate notice of 
loss, protect saved property, separate sound and damaged property, 
schedule the same, and render a statement thereof to the company, duly 
signed and sworn to ; state also the time and origin of the fire, interest 
of the insured and of all others in the property ; the cash values and 
amounts of loss in detail, amount of incumbrances and other insurance ; 
the occupancy of buildings described, the changes in the title, occu- 
pation, location, possession or exposure of the property since the issuing 



FIRE UNDERWRITERS' ASSOCIATION. 139 

of the policy ; and furnish certificates of magistrate or notary public 
nearest the fire regarding the honesty of loss. This ordinarily is termed 
a proof of loss, and when verified, and accompanied by the detailed 
schedules and particularized statements, would be proof sufficient in 
ordinary eourts of justice. 

The method of compilation is by no means final as regards the liability, 
and in fact varies to suit the fancies of adjusters and companies. 

Wherein Mr. Winne and I differ is that he holds that there is nothing 
due until these various conditions, as aforesaid, have been complied 
with ; whereas I hold that a policy matures at the happening of a fire, 
but does not become payable until after these conditions have been com- 
plied with. In other words the date of payment depends upon the ful- 
fillment of certain conditions. It therefore would assume the nature of 
an unascertained credit at the time a fire occurs, and an ascertained debt 
when the terms and conditions of the policy have been fully complied 
with, both of which propositions are attachable. No one will deny that 
a competent court of jurisdiction, in case of failure by the insured to 
comply with such conditions, could be appealed to for relief by creditors, 
upon proper showing that insured declined to carry out such conditions 
for the evident purposes of fraud. 

A garnishment is by no means a demand for payment, but simply a 
legal notice that the money shall be held for the protection of an attach- 
ing creditor ; and the attaching creditor does in no manner acquire 
greater rights of recovery against the insurer than that which the insured 
himself enjoys. This notification, therefore, to the insurer to hold any 
credits or debts due, subject to the writ of attachment, if ignored by the 
insurer, would lay the insurer liable to a suit for damages, as the statutes 
of frauds would provide against the conspiring of an insured, with the 
insurer, to the injury of a creditor. Under this head of process, there- 
fore, the true principle for the insurer is only to accept service of garnish- 
ment or attachment through the duly authorized and recognized attorney 
of record in each State. 

THE LAWS GOVERNING THE PARTIES UPON WHOM PROCESS SHOULD 

BE SERVED. 

The law governing insurance companies as regards parties upon whom 
process may be served, in all actions or other legal proceedings, is in 
many States similar. In California an insurance corporation must file 
in the office of the insurance commissioners the name of an agent, and 
his place of residence in the said State, upon whom summons and process 
may be served. Canada, Maryland and Pennsylvania have the same 
law. Colorado, Connecticut, Kansas, Massachusetts, New Hampshire, 
Maine, Rhode Island and Tennessee require that process or service must 
be made upon the insurance commissioner or superintendent of insurance 



140 SIXTEENTH ANNUAL MEETING OF THE 

of each State. Deleware, District of Columbia, Georgia, Illinois, Louis- 
iana, Nevada, New York, Oregon, Texas, Utah, Virginia, West Virginia 
and Idaho require that some resident of each State be designated as 
attorney. In Dakota upon an attorney designated in each judicial dis- 
trict. In Indiana and Iowa upon an agent designated in the State. In 
Michigan, Minnesota and Missouri upon some resident of the State to 
be designated, or upon the insurance commissioners. In Mississippi 
upon an agent to be designated, or upon the State Treasurer. In Mon- 
tana upon some person to be designated in each county. In Nebraska, 
New Mexico and Wyoming upon some person to be designated residing at 
the county-seat of each county. In North Carolina upon a general 
agent to be appointed in the State. In South Carolina upon a general 
agent resident of the State, and upon the clerk of the court of each 
county. In Vermont upon the Secretary of State. New Jersey and 
Washington have no regulations regarding the appointment of an 
attorney for the purpose of accepting service of legal process. In Ala- 
bama, Florida, Kentucky, Ohio, Wisconsin and Arizona upon all agents 
of the company in the State or Territory. In Arkansas upon the State 
Auditor, or some person designated as attorney. 

It would therefore follow that, to steer clear of the dangers accruing 
through a disregard of an attachment, when such attachment or garnish- 
ment is attempted to be served or filed upon any agent or officer of an 
insurance company other than the duly authorized attorney of such 
company, they make plain answer that they have no funds or credits in 
hand belonging to the defendant. Service of an attachment in execution 
upon a corporation as garnishee, when made on an agent of a corpora- 
tion, must be made at the usual place of business or residence of such 
agent ; and mere personal service on the agent is not sufficient : the 
return of the officer must show on its face a legal service ( Wlnrow vs. 
Raymond, 4th Barr., 501 ; Wilson vs. Hayes, 6th Harris, 354; Weaver 
vs. Springer, 2 Mils., 42 ; Lehigh Valley Insurance Company vs. Fuller, 
Penn. S. C). 

THE AUTHOR'S REMEDY. 

Insurance corporations in most of the States being obliged to desig- 
nate an agent or attorney upon whom service or process may be served 
should decline to receive any service or process through any other 
officer, and should go as far as to deny plainly any liability until all the 
conditions of the contract have been fully complied with, or process or 
garnishment is properly filed with their duly authorized attorney or 
agent. Then, before paying the loss, they should insist that all such 
garnishments or attachments be duly released; in other words, let the 
other fellow do the worrying. \ j # WETZLAR. 

(Applause.) 



FIRE UNDERWRITERS' ASSOCIATION. 141 

Mr. Carpenter — I realize that this session is short, and 
that we have not a great deal of time to discuss such an 
important subject as this; but I will just state that the 
attorney of the Board of Trade of San Francisco seems 
to be so far impressed with the ideas of Mr. Winne and 
Mr. Driffield that in recent cases he has taken the pre- 
caution to serve a second garnishment after the proofs 
have been filed. 

Mr. Sexton — This question of garnishment and service 
is very important in our business ; and while Mr. Drif- 
field and Mr. AVinne may be correct, I have always been 
on the side that Mr. Wetzlar takes, for the reason that it 
is always safer to hold the money, and, as he says, let the 
other fellow walk the floor and wait until — if there is 
any dispute or any question — we get an order of court to 
pay it over. 

I had personal experience in the case of Myers vs. Mott, . 
cited by Mr. Driffield, in which I learned an important 
lesson, and which made my hair stand on end at that 
time and long afterwards, but it don't now. About 
twenty-eight years ago this coming spring that hap 
pened. I had just been elected the sheriff of an up- 
country county. I was a good deal younger than now, 
but quite as green. It was a very important case, so I 
started out myself, taking with me a man who knew some- 
thing about the service of papers. The defendant had 
had a paralytic stroke, and had only one eye open. 
His wife and his sister-in-law and brother-in-law and the 
whole family were around the bed when we arrived, 
about four o'clock in the morning. They all came 
after me, and begged me not to disturb the old gen- 
tleman, — to take everything in sight. Finally I concluded 
to serve that attachment anyway, and the only way to 



142 SIXTEENTH ANNUAL MEETING OF THE 

serve it was to serve it personally: I rode back five 
or six miles and walked into the house, and placed the 
papers between his thumb and fingers and walked out. 
He died that afternoon of course ; I did not do anything; 
I did not kill him. When the case came up in court I 
was asked if the man knew that he had the papers, and 
I told them I did not know. They asked me how the 
service was made, and I told them. If I had not made 
that service property my bondsmen would have had to 
pay the amount, and I probably would have been in 
Australia or somewhere else by this time, and never 
been in the insurance business. 

Then I would say to my young friends and to others, 
in this connection, to keep on the safe side and take no 
chances. While Mr. Driffield, Mr. Winne and Mr. 
Wetzlar know the law, you hold the money and let the 
other fellow walk the floor. 

Mr. Carpenter — Unless you can make more money for 
the company by pursuing the other course. 

The President — I think there is no doubt that we 
would be willing to pay the money in cases of that kind, 
but in the discussion that came up last year on this sub- 
ject a very important point was this : We will suppose 
your adjuster is in Los Angeles, Seattle or elsewhere, and 
has authority to draw upon the office here if the proofs 
are satisfactory. We will say this morning an attach- 
ment is levied on the company, and in half an hour your 
adjuster happens to pay your loss. In that case, what 
are you going to do ? 

Mr. Kinne — It seems to me that a draft from an ad- 
juster is simply an order to pay a certain amount, and 
for which he has taken certain papers. If that amount 
is not paid the receipts are of no value. 



FIRE UNDERWRITERS' ASSOCIATION. 143 

Mr. Sexton — I have always understood that when the 
adjuster gives a draft on the company, and has taken 
receipts for it, that that was sufficient for him. The 
party would have a right to be paid, no matter what posi- 
tion he occupies. 

Mr. Faymonville — I think Mr. Sexton is correct in his 
position. I asked our attorney once about this point, 
and he said there was no question about it. We would 
have no discretion whether or not to pay the assured if 
that paper came in : we would have to pay it. 

The President — If there are no other remarks on that 
subject, we will listen to a short paper by Mr. A. R. Gun- 
nison. Mr. Gunnison is not present with us, I am sorry 
to say, but the paper is in the hands of Mr. Sewell, who 
has kindly consented to read it. 

Mr. Sewell — I do not know whether I can do this paper 
justice or not, but I will read it as best I can with the 
short preparation I have had. 

PAST PLEASURES VS. PRESENT COMFORTS. 

I promised you a few lines, by way of light reading, to dovetail in 
between two of your solid articles, to be read at this annual meeting. 
Unfortunately I was unexpectedly called away from San Francisco on 
urgent business. We adjusters, you know, always expect the unex- 
pected, and seldom are disappointed ; and the business is always urgent. 
The time is short, and I fear this will not reach you in season, and, if so, 
you may be the gainer. We agreed upon a subject for me to write about, 
but, as I did not make a memorandum of it, I cannot at this moment 
recall it. If you remember it you will please put it in right here, and I 
will say my say, hit or miss, with the large chance of this being, like 
" the play of Hamlet with Hamlet left out," an old chestnut. 

An old stager like myself, who commenced his checkered career as an 
adjuster on " the Slope " some thirty years ago, often smiles as he listens 
to the tales of woe related by the young adjuster who thinks he is 
the man who gets all the experience that solidifies the brain and hardens 
the muscles, as he travels over mountains, valleys and plains in pursuit 
of the mystic losses of the mystified lossees. 



144 SIXTEENTH ANNUAL MEETING OF THE 

But the subject of this paper is to convince the adjuster, who has 
adopted the above title in the decade of the nineteen hundreds, that we 
of the olden time had our advantages which the youngster will never 
appreciate if he lives to be known as the oldest adjuster upon the Coast. 
He can never take stage from Sacramento in the hot summer time, 
mid dust and heat, and wend his slow way through the Sacramento Val- 
ley during the day, and over the mountains in a dark night, when not 
even the horses can be seen, or through rain and sleet over the Siskiyou 
into Oregon, and on and on, night and day, for four of them, to Portland, 
Or. ! What a blessed experience was that ! Plenty of time to study the 
face of nature, to learn the location of every river and rivulet, every 
mountain range and gravelly hill, and make one's acquaintance with all 
the beauties of nature, learn where the warm currents and cold currents 
of air come in, look down the muzzle of a yawning pistol, behind which 
there stood a " Black Bart," — of bandit fame, — study the colors of the 
soil, from the dull gray and black loam of the valley to the blue, yellow 
and white clays of the mountains, and ride and ride, and bump and 
bump, till it was hard to tell w T here the corporeal body left off and the 
seat of the stage commenced, so numb and cold would one become. All 
of this was grand experience and a soulful pleasure, — to look back to ! 

We became familiar with nature in all its "visible forms," and got our 
muscles hardened from the tops of our heads to the soles of our feet, also, 
measuring from the extremities, centerward, likewise and particularly ! 
This my young friends can never know. Now they get aboard the Pull- 
man, glide glibly past all pretty and unpretty scenes, "and see them 
not," sleep over the mountains in a comfortable berth and know not 
w T hat they are missing, and taste not the generous dust of the virgin soil, 
but, instead, swallow the black coal-dust of a noisy engine. We of the 
olden time, who took stage at Stockton and meandered through the 
whole length and breadth of the San Joaquin Valley, as we sat bolt 
upright in the "jerky " could dream of what that great valley might and 
has become, while you, my dear boys, have nightmares of what may 
become of you if Tehachapi should repeat its dire disaster. Do not have 
your day dreams of what you are going to achieve, in the line of adjust- 
ments, that shall make your name famous by the time you can claim the 
title of the "oldest, etc," and imagine that w 7 e, who have given our best 
days to the service, cannot more than duplicate your rosy dreams with 
the contemplation of what we have done ! 

No, you will never know this whole slope from the Pacific to the 
top of the Rockies, and from Mexico to Sitka, as we know it all, — by 
actual contact. We feel it in our bones ; our blood is impregnated with 
the pigments found in its many soils, even to gold and silver ores, that 
we have breathed in the air and drank in its waters. You can never 
know those joys ; your muscles will never be hardened by the pounding 



FIRK UNDERWRITERS' ASSOCIATION. 145 

and bouncing, wrenching and twisting, of the pioneer stage. The car, 
with its plush cushions, has taken the place of back-breaking vehicles ; 
and you can never know the exhilarating, life-giving feelings made 
by sinews necessarily made hard as steel ; for now you are soft and 
limpid, with a body that kicks at a ten-mile ride on anything else but a 
railroad car, and a soul that growls at any but a Pullman at that. 
The lovely experience that the young adjuster has lost by not being 
born earlier is fearful to contemplate, and I sympathize with him ; for, if 
he lives to the age that makes men wise, he can never be as wise as we 
of the old school. 

At one time the writer could have told the soil of each main section of 
the Coast by the taste. This would have been of great value to a 
real estate agent, who, by a course of study and experiment, could have 
learned how to detect good soil by simply tasting it, and thereby could 
have dealt in land in all parts of the Coast by having small samples sent 
by mail, without a chance of being fooled. If I was not too old I might 
develop the science yet ! The young man who, finding himself unable, 
on account of the billows of the Pacific Ocean, to accept Horace Greeley's 
advice of " Go West, young man, go West!" may take a hint and go 
into the real estate business, and open up a new enterprise, there being 
no one in that business at present this side of the Sierras (?) 

What we old chaps don't know about the beauties of the Slope isn't 
worth knowing. We have slept with her many a night, inhaled her 
balmy breath, traveled with her in rain and sunshine, the while with 
arms around the shoulders of the stalwart stage-driver, or clinging to the 
iron rail of the coach-top to keep from being shied headlong into some 
ravine or dark cavern, which form the only wrinkles upon the face of 
this lovely Slope. 

The knowledge that we possess of the inequalities of surface, of every 
projecting rock and every chuck-hole or slight depression in the roads, 
from San Diego in the sunny South, to Olympia in the drizzly North, 
fram San Francisco, where the sun sets in the mild Pacific, to where 
she comes, red hot, the next morning, over the sands of the Great Ameri- 
can Desert, is something wonderful ! You, my dear young specials and 
adjusters, can never hope to gain this valuable knowledge. The rail- 
road shoots you rapidly over a road-bed made smooth at a cost to the 
stockholders of ten thousand dollars a mile, and you will never be able 
to understand the delights of being tossed, perpendicular, a foot in the 
air and met by a hard leather cushion on your way back, and then 
twisted and twisted into a letter S, and straightened out again with a 
double-headed jerk, in the almost vain attempts of the stage to get steady 
again. Then what a heap of valuable information you have lost ! The 
old adjuster has been so thoroughly educated in all those nice points, 
including those that came nearest to said leather cushion, that he could 



146 SIXTEENTH ANNUAL MEETING OF THE 

detect the exact location of the stage on the darkest night. Often the 
writer has been awakened from a cat-nap by one of those " soul-wrench- 
ers," and, without opening his eyes, would sing out, " Oh, that can't be 
more than three miles from Sutter Creek, Amador County ! " or, " that's 
just a mile and a half from Devil's Gap ! " It is, however, related of one 
old special, who had got so hardened in heart as well as — well as — back- 
bone, that he mistook the location altogether and sang out u Hell ! " 
The driver thought he meant hello. He was a bad man. There are 
some bad men even among the oldest specials and adjusters. We will 
not discuss that point. We hope the new crop of adjusters will all be 
nice boys. Certainly they will never have the provocation we old boys 
had. 

I slept last night on the soft side of a bench. The only hotel has 
burned. This is not the first time the " only hotel " has been known to 
burn. I am surrounded by snow banks ten feet in depth. All of this 
has its influence. Hence I come to an abrupt close. I wish I could be 
with you on this anniversary. I regret this forced absence all the more 
as I contemplate the fact that I am growing old. Each successive year 
may be my last to meet the boys with whom I have passed so many 
happy reunions since first we started this now great and useful and 
almost indispensable association. " L,ong may it wave ! " 

A. R. GUNNISON. 

(Applause.) 

Mr. Kinne — Mr. President : It lacks ten minutes of 
twelve, and you requested that no remarks be made upon 
Mr. Driffield's paper until after Mr. Wetzlar had read 
his ; and before the gentleman reads this paper I should 
like to make some observations on Mr. Driffield's paper, 
unless you have something else you desire te present. 

The President — No, sir. 

Mr. Kinne — I quite agree with the proposition that 
Mr. Wetzlar advances, that the note is matured when the 
fire occurs. The claim comes then, and we ought to be 
watchful of any matters pertaining to an attachment or 
garnishment upon even an indifferent proposition. I 
believe that the note is matured as soon as the fire 
occurs, and that is the ground he takes. I am fully in 
accord with his idea, and being in accordance with it, 1 



FIRE UNDERWRITERS' ASSOCIATION. 147 

wish to call the attention of yourself and everybody else 
here to a fact that has only been brought to my attention 
within the last few months in ascertaining their legal 
obligation. It has seemed almost impossible that, sup- 
posing a fire occurred in Tacoma and one of the partners 
of a firm was a resident of Portland, Oregon, a different 
State entirely, that suit can be commenced by a creditor 
in Portland who had sold this firm in Tacoma or Seattle, 
or wherever it was, and as soon as suit is commenced 
the sheriff of Multnomah County can be called upon to 
serve upon this party, — service upon the partner and 
also upon the resident agent in Portland ; and that that 
is a good service upon credits that have accrued for the 
burning of goods in another State. So there is a point 
we want to be careful about, and I desire to bring the 
attention of the members to that fact, which would seem 
as if the sheriff of the county, or in the State where the 
fire occurs, and the State where the loss accrues, should 
be liable to have service ; but the law says that service 
can be made upon the defendant in a case as soon as it 
is thought that any one has property or is liable, at any 
point where service can be had. In this case we had a 
resident agent in Portland ; service was made upon him 
and it held. It was new to me, and possibly it may be 
to some members of the association, and that is the 
reason I wish to speak of it. 

Mr. Carpenter — I will only say one word, and that is 
this : that I cannot believe that the note matures, or 
that the obligation matures, whenever the fire occurs. 
We have had cases in our experience where fire ocurred: 
we found out subsequent to the fire that the man had 
sold the property weeks before it occurred. There was a 
case where there was no liability whatever. Certainly 



148 SIXTEENTH ANNUAL MEETING OF THE 

the obligation had not matured; no contract had matured. 
Also there may be cases where we find men had set their 
property on fire ; they were seen setting it on fire. No 
contract matured there; we don't owe the man a cent. 

Mr. Edwards — Mr. President: I would like to ask Mr. 
Carpenter if there was no evidence that the note does 
mature, would there be any liability under the note? 

Mr. Carpenter — We insure John Smith on a certain 
building situated on a certain street ; that property 
burns. We find that, at the time of the fire, it belonged 
to William Brown. I would like to know if there is any- 
thing due on our part ? 

Mr. Kinne — What I mean to get at is this: that the 
contract is matured to a certain point. Many a note 
matures, and you never collect a dollar on it because 
there is nothing behind it, — no indorsement or no prop- 
erty; and in that case you never collect anything. It 
goes into the waste-paper basket, or is filed away. In 
making this contract we agree to indemnify in case a 
certain thing transpires: it transpires in the way desig- 
nated, and that w r hether it is one dollar or ten thousand 
dollars. That I believe is the only point we differ about. 
I believe thoroughly, as Mr. AVetzlar does, that it is so, 
and certainly, as Brother Sexton says, it is a darned 
sight the safest. 

Mr. Carpenter — The certain thing that must transpire 
is the creating of that liability on the part of the com- 
pany. That is the certain thing that must transpire, 
and that liability on the part of the company cannot be 
created until the loss has occurred and the conditions of 
the policy have been complied with. Of course I believe 
in pursuing the course suggested by Mr. Sexton, and I 



FIRE UNDERWRITERS' ASSOCIATION. 149 

generally do pursue that course. I am willing to let the 
other fellow wait, and to hold the money, unless it is 
going to be an advantage to the company to pursue some 
other course. 

Mr. Sexton — In the paper read by Mr. Driffield, in 
describing attachments or garnishments, the word 
"credits" was in there, among other things. Now, as Mr. 
Kinne says, it is a credit, but it is unascertained as to 
the amount. It may not amount to anything, to agree 
with Mr. Carpenter ; or, to agree with Mr. Kinne, it may 
amount to ten thousand dollars. 

Mr. Kinne— The credit can be attached in any State 
where you may have a resident agent; and it can be at- 
tached in Portland, Oregon, if service can be made upon 
one of the partners there, for property that may have 
been burned in Centralia. 

The President — It is twelve o'clock, but we have so 
much to do this afternoon that, if you think advisable, 
we will hear Mr. H. M. Grant's paper. I would like to 
ask Mr. Grant how long it will take to read it. 

Mr. Carpenter— If Mr. Grant's paper would not take 
over ten or fifteen minutes, it would be well to hear it. 

The President — And then we can assemble again at 
two o'clock, because we have a great deal to do this after- 
noon. I beg to say that Mr. Hicks, who is down for a 
paper on the subject of The Manager, did not come to 
time. Mr. Grant will favor us. 

WHAT DO WE LEARN? 
I have been led to wonder, from all our experiences, what we learn. 
We are always striving for the best. Progress is our watchword— prog- 
ress towards and for the greatest success— in practices, by methods, in 
ability, of wise selections, by prudence, conservatism, the highest intelli- 
gence in our business, corrections of past errors, in everything looking 

F. U. A. 10. 



150 SIXTEENTH ANNUAL MEETING OF THE 

to the limit of the fire hazard to our risks, those we recommend or decide 
to accept in particular, in everything looking to ultimate profit ; but do 
we succeed, that is, in the ultimatum of profit, or indeed in the reduction 
of fire loss, over and beyond the efforts of those who struggled to the 
same end a quarter century ago ? If not, why not ? 

Perhaps it is not possible in view of all the more modern construction, 
newer methods of lighting and heating, rapid settlement and develop- 
ment of the country, overgrowth, unsettled financial conditions, ease of 
credit, human weakness ; perhaps it is not possible in view of it all and 
the improved methods of protection, fire defenses, accumulated experi- 
ence and all, — to check or reduce the fire waste of the country. We 
progress in everything else ; civilization improves ; wars give way to arbi- 
trations ; the generel comfort of the race is enchanced ; education 
advances ; inventions and appliances of hitherto unrevealed or unem- 
ployed forces are marvelous ; the science of coping with disease and of 
prolonging life is developed ; the death rate decreases ; but still, viewed 
as a whole, the annual rate of fire waste goes on and augments. Perhaps 
there is reason for it all in the many besetting causes, or that the causes 
are too ponderous to successfully manage or control, as the diseases of 
the human race are understood, controlled, modified and made less 
destructive. There seems to be an immutable law governing this in the 
face of all the study given to the subject, and the contrivances of preven- 
tion and cure ; yet no alleviation as a whole is produced, and fire destroys 
greater values than ever. 

But with all the experiences open to us is it not possible to so conduct 
the affairs of fire insurance as to bring about the ultimatum of greatest 
success and profit, — greater profits? In other words, do we learn from 
what we are taught? Evidently not, or there would be the greatest suc- 
cess and the greater profit. 

Had I the naming of subjects to be treated in essays before this asso- 
ciation, one of them would be entitled, "What Constitutes an Able 
Uhderwriter ? " and I would call upon to dissertate upon it that one 
who, by common consent, is referred to as lt one of the ablest under- 
writers." Is he not one who heeds all the precepts of the past ? Is he ? 
Has he not his fads as well as any of us ? Is he not governed in his own 
mind much by accumulated experience of his own, governed and molded 
it is true by his intelligent observation and adaptation of general experi- 
ence ? but are not his plans of action molded also by what he has found 
good for him ? He will not write crop insurance that his neighbor finds 
profitable. He will assimilate hops that others find too warm and 
bitter. Flour-mills he craves, but a sawmill is too high flavored. He 
will rejoice at a planing-mill, while a shingle-mill is an abomination. 
Farm risks are his delight, while his neighbor loses faith in the honest 
granger and his defenseless house and barn. A boarding-house will not 



FIRE UNDERWRITERS' ASSOCIATION. 151 

tempt him, while a cross-roads store captures him wholly. Small lines 
he will write, or larger ones he finds the better, and with it all his risks 
burn, able underwriter that he is, and his loss ratio helps to bear out the 
general average, be it less this year or greater next. 

What do we learn, and how shall we best employ our knowledge. We 
learn that towns built mainly of wood, towns without water supply, or 
without a fire department well organized and equipped, make frequent 
calls upon us. What is the teaching? Evidently to avoid such calls by 
writing in no wooden towns or towns without fire defenses. How many 
such towns have cost your companies heavily ; and yet did you not try 
and try again in just such towns, not always the same ones, for those had 
a " hoodoo," but in others no better, and in the same ones too you did 
again and again. Another teaching quite as evident from this is, get 
premiums enough from these combined towns to overcome the com- 
bined losses in them. Which now shall we do ? We learn also that 
there is a conflagration hazard. Some of us had it burned in upon us 
anew last fall in The Dalles, and the old wounds of the whole corps bled 
afresh at the mention of Seattle, Ellensburgh, Spokane, Bakersfield ; 
but why probe them ? In an able paper read before this association by 
Mr. Belden in 1890 he computed the ratio of loss in general fires (con- 
flagrations) to be, in normal years, about nine per cent of the total 
premium, which,' his comparison extending as it did over a period of 
nine years, constituted a proper basis of average. It is not great, per- 
haps,— some years much more than others, — but it comes about ; and is 
it not about nine per cent more than we calculate upon in our daily 
consideration and action ? How little it practically enters into the cal- 
culation of the most prudent underwriter, however much in his mind he 
recognizes it. His prudence dictates to him to moderate his lines in any 
block to the possible contingency of a sweeping fire ; and yet he knows 
that, if the very sweeping fire does come, and that nine per cent of 
his premiums are swept off in that manner, that he will be involved for 
say fifteen times- his expectation of loss when he arranged his lines. 

We learn that the conflagration conies. The teaching then is, let us 
discount the certainty of nine per cent loss by general fire by limiting 
our lines in such defenseless towns to the limit we would prescribe for 
one block in it. This is clearly and plainly the thing to do ; but do we 
or can we do it ? and how impracticable it becomes ! How easy, if we 
could only guess what town would contribute to it ; and the " able under- 
writer " thinks he knows, and does almost, but he didn't quite the other 
time. 

Are we any wiser on the point of moral hazard, — wiser to the point of 
affecting the general loss ratio by our wisdom ? We ought to be ; we 
are constantly learning about it, constantly meeting it. How well do 
we succeed? It is an ever-present hazard, and we seek to hedge it 



152 SIXTEENTH ANNUAL MEETING OF THE 

about in so many ways ; we scrutinize the commercial report of this 
one and that, a report made perhaps by some correspondent with a 
personal prejudice, and one affording us some means of knowing 
whether w r e would better sell him merchandise or not, but nothing as to 
whether he is a suitable customer or no for our goods, except inferen- 
tially ; and each one of us must be the one to draw his own inference, 
however mistaken. What would be directly to the purpose is a bureau 
of information upon this particular point, cut and dried, and the 
inference drawm ; but then possibly it would not be absolutely adhered 
to, because our own wisdom would be deemed as serviceable. If the 
commercial report is particularly bad, then we drop the consideration 
of the risk and probably prevent loss, but a novice would do that. Or 
we consult the "Fire Record," and find John Smith's name with sus- 
picious characters and symbols opposite it ; but is he our John Smith, 
and do we always presume that he is and possibly err on the safe side ? 
Always ? No, not always ; and what infinite pains is avoided, that we 
are taught to take, on the perhaps very proper assumption that it is not, 
among so many who maybe called by the same name. Or, with all our 
circumspection, the morally hazardous man moves in next door, and his 
propensities to " realize " embrace our carefully selected risk. And now 
the agent is at fault because he did not let us out, when perhaps he 
could not anyway ; and another atom of the law that regulates our loss 
ratio as well as physical farces or operations, or the law of fire waste, is 
put in motion. Or we shun the town that circumstances point to as 
declining because of the miasma of moral hazard breeding there from its 
decaying life ; and the inoculated merchant takes his infected stock to 
our rising town and fumigates it for our delectation : and our wisdom 
was before so great. 

Wh}', then, with all the knowledge we have, with w T hat we have 
learned by individual and combined experience, are not the conditions 
better than they are, more success attained, greater profits realized ? Is 
it because the teaching is not heeded ? Much so ; w r e feei convinced it is 
so in considerable degree, — absolutely unheeded, — for various reasons, 
among them that, well learned as the precepts are, in the nature of 
things the education cannot always be practicably applied under existing 
conditions. With Brown-Sequard's elixir there was to be no more age 
and wrinkles ; with Koch's lymph death was to be robbed of many of its 
victims. Old age and death still stalk abroad notwithstanding all the 
research, discovery, experience, with, however, their conditions amelio- 
rated by the progress of discoveries and intelligence. We learn of the 
sovereign remedies to prevent fire occurrences, to nip in its incipiency 
destructive flame ; we hold high the light of experience to illumine all 
down the way, making clear the corners where disasters may lurk, and so 
put them to rout ; but the little imps are there all the same, and we come 



FIRE UNDERWRITERS' ASSOCIATION. 153 

out at the end with the average loss ratio of other years, happily a little 
under, maybe a little over : and what has become of what we learn? 
What is wanted is somebody to point out the baccilus of persistent loss 
ratio and develop the lymph to antagonize it. 

I cannot help clinging to the idea, however, that if what is learned 
were so well learned as to be thoroughly appropriated, stood by, applied, 
rich rewards would be won ; but how best to do it is the rub. So many 
causes transpire, so many features enter in, so varied is individual 
opinion as to what is learned, to render the full use of that learning, 
its application, futile, disregarded, impossible, that the experiment is 
thought worthy to be tried over and over, with modifications perhaps 
suggested by past experience, no essentially new paths broken, but to 
the same general end of a pretty nearly uniform loss ratio, one decade 
with another. I believe the fault lies in a great degree in the absence of 
collated, combined experience ; so that what has now been found good or 
bad for one or a dozen may be proven beyond a doubt good or bad for 
all (aside, I mean, from the general agreed conviction on many points, 
which latter goes to make up the general understanding concerning 
underwriting), and the combined experience come to result in such 
intelligent and cohesive rating as to be as patent as our general guess on 
the subject is now ; but then the millenium would be at hand, and all 
uses of the underwriter in the world's economy have departed. True it 
is that many individually record their experiences over many years ; 
but do they individually apply an individual schedule of rating as a 
result of what they learn, independently of their neighbors and on new 
lines? No, they do not, because they would not have patrons. And 
did their annual loss rate manifest their superiority in wisdom and 
acquisition of learning over others for whom statistics had no terrors, 
who though writing with no careless hand had not learned from the 
valuable teaching of compilated experience which the other did not 
obey ; or did it have weighty effect upon the loss rate in general, dis- 
turbing the law which seems to govern it? Why, oh why, when the 
fire destruction is so certain, obeying as absolute a law as any occur- 
rences in the world of society or physics, costing always a seemingly 
fixed amount of premium income gathered from all sources, may not 
the rates be brought to that point of compensatory premium income 
that it is found we come short of! Why the haste and strife and defiance 
of the maxims learned to prevent it ! With all our prudence and learn- 
ing and experience, with all that we learn, a most important factor after 
all to be determined is that whether we will get price enough for our 
produce over a conservative cost of production, whether we will get 
premiums enough from defenseless towns or premiums enough to offset 
the nine per cent conflagration loss, or premiums enough, altogether, to 
meet the loss everywhere,— the light frame of the tired merchant in the 



l')4 SIXTEENTH ANNUAL MEETING OF THE 

promising village, or the creaking warehouse that rears its bricks to 
heaven in the city of fire departments and water towers. 

We must not forget that, coincident with all the improvements we 
notice in protection in the way of prevention, and protection in the 
way of appliances for defense, there is or has been a corresponding 
pressing down of rates, the price of the article produced ; and, when that 
is met with the fact of no less but increasing fire waste as a whole, much 
of the lack of that striven-for success by the application of some things 
that are learned is accounted for. Happily that state of things is meet- 
ing with improvement in the East, and in our own section has not been 
so marked though it has had that tendency. And another thing not to 
be forgotten is that the expense rate, the cost of production, has kept 
pace with the reduction in premiums, thus burning the candle at both 
ends ; and whatever is learned in the avoidance of loss, of prudence in 
selection, of surveillance, of limits, of all that is good, and burned in by 
experience, is nullified by causes like these. And this we learn, too, 
that it is not wise to burn the candle at both ends. For every premium 
there is an amount at risk. The aggregate of many premiums represents 
much at risk. That the loss-paying ability from an aggregate of prem- 
iums representing a considerable amount at risk is less than the loss- 
paying ability from the same aggregate of premiums representing a 
smaller amount at risk of the same class, and the opportunity for loss 
greater, is too evident to speak about ; and when to this is added an 
increased cost of production there is not much left of the candle, cer- 
tainly not unless all the other wise things we learn are applied. 

There does also enter some element of chance. Disguise it as we 
would, call it science, discrimination, ability, there does appear the 
factor of chance, affecting in a greater or less degree our successes or 
lack of them. The utmost perspicuity of the underwriter cannot foresee 
the firebug and his torch about our carefully weighed and tested risk. 
It w r ould require more than the usual acumen of the local and special, 
the eyes and arms of the manager, to enable him to surround his accep- 
tances with the chance possibilities and weigh them with the rest. 
Neither can he foresee the failure of moral excellencies in his client, or 
his new T neighbor, that will disturb his plumbed and squared and well- 
adjusted structure, nor guard against chances of the most unanticipated 
character and at variance with best accepted theory. 

We learn much. Individual experiences, without the valued help of 
combined experiences, gradually crystallize and become accepted as 
the tenets of faith for general adherence. Our business is one of con- 
stant development ; and the earnest thinker, while he can solve many 
problems to his own satisfaction, which circumstances may and do 
preclude his putting to satisfactory practice, yet succeeds in putting 
some polish onto the fabric, reflecting some good to the whole business, 



FIRE UNDERWRITERS' ASSOCIATION. 155 

striving after his own way to advance the profit-earning abilities of the 
methods at command. Profit lies in an adequate schedule of rates to 
produce adequate premium income, reduction of losses, and minimum 
expense, all of which is an axiom. We learn that one of these factors 
wanting the satisfactory result is not attainable. 

Do we learn enough to develop an actual factor in the reduction of 
insurance loss, with all the means at hand for learning? Is not the loss 
ratio a continuing quantity, and is it not governed by a law made a law 
by the absence of application of things learned ? I am inclined to think 
so ; — that it is certain that fire loss, in perhaps increasing ratio, will be 
sustained regardless of increased intelligence to subdue it ; that it is cer- 
tain human nature in the aggregate will be weak enough to unlearn the 
teachings from the past ; that impracticability many times prevents 
the assimilation of those teachings ; that greed and strife will tempt to 
venturing against well-backed theories ; that the same greed and strife 
will test the experiment of burning the candle at each end at one and 
the same time ; and that these conditions go to constitute that law, and 
that it will be a law until the conditions so vary as to constitute another. 
Xike other natural laws that affect individuals, society, economy in 
general, and immutable in their general operation, only modified by 
changes in general conditions slowly led up to, so this, seemingly one 
purely under the control of any one individual, as to himself, becomes 
in association, from the diverse elements and conditions of the associa- 
tion, as immutable, to be perhaps the more readily modified by the slow 
conditional changes brought about by the usual method of advance and 
development, — the studied, courageous, firm influence of the few who 
will step forward and make a line of advance for others to " dress up " 
to, the methods by which from the dark ages has been developed our 
present enlightenment. 

Meantime the law governs by reason of these surrounding conditions ; 
and what do we learn by it, you and I ?— that fire loss will be sustained 
as certainly, but that we individually may be strong enough in our own 
human nature not to unlearn the teachings, to reduce the impractica- 
bility of their observance by resolute obedience, confident of their value 
beyond the present, to be content with the knowledge the moth never 
learns, — that his wings will burn in the flame,— and resist the tempta- 
tion of venturing through greed and strife. This we might individually 
do even while the general law would govern for others not so wise, but 
collectively we must extinguish the burning wick at one end or the 
other of the candle. No individual effort can do that, or we would still 
suffer its results. How our loss ratio would diminish by this happy 
state of things ! and what about our premium income at the same 
time, while our fellow laborer was still groping in the darkness or yet 
riotously wallowing in his ignorance. Nevertheless the profit account 



156 SIXTEENTH ANNUAL MEETING OF THE 

would better please us I am convinced. Each one striving for the best, 
to the closest follow the teachings, will accomplish much towards estab- 
lishing a more kind law. 

My query is, "What do we learn," and not only this, but "Do we 
apply what we know?" 

H. M. GRANT. 

(Applause.) 

The President — Are there any remarks on Mr. Grant's 
paper ? 

Mr. Sexton — There are altogether too many facts in 
that paper to be talked about now. 

The President — Which are unanswerable. 

Mr. Sexton — We don't apply what we know. 

On motion, a recess was taken until two p. m. 

Afternoon Session. 

The President — The first paper on our list this after- 
noon is one by Mr. W. S. Du Val, Manager of the Pacific 
Insurance Union. I will now ask Mr. John Scott Wilson 
to favor us with the reading of the same. 

THE ASSOCIATION AND THE COMPACT. 

During my connection, now of some seven years' standing, with the 
Pacific Insurance Union, from the time w T hen, with a block sheet under 
my arm, and pencil in hand, I walked the streets "south of Market" 
mostly, and took m)' lessons in describing " four-story frames with 
metal roofs " and " three-story bricks with w T ood cornices," I have read 
the accounts of the proceedings of the Fire Underwriters' Association of 
the Pacific with the greatest interest, and have often remarked the con- 
tinued attention given the P. I. U. at the annual meetings, when the 
wit and brilliancy of the members combined with solid instruction and 
deep thought to make the meetings of this organization the notable 
event of the year. 

It has always impressed me that the criticism and advice given con- 
cerning the workings of the Union have often come from members 
who could be best answered by those engaged directly in the work of 



FIRE UNDERWRITERS' ASSOCIATION. 157 

supervision, inspection and the carrying out of the rules. With the excep- 
tion, however, of the honorary membership extended to the executive 
officer, there has been no opportunity for those laboring in the extensive 
territory covered by the Union to get on their feet and talk back. That 
close and careful attention given so many cities and towns ; that inti- 
mate knowledge of human nature gained by intercourse with every 
agent, special or underwriter interested in the improvement of a risk, 
with an eye solely to the betterment of the hazard, the rate being an 
after-consideration ; that judicial knowledge gained by the investigation 
of complaints and the close weighing of contradictory statements, — has 
had no chance to make itself felt and appreciated. Why this should be, 
and why the staff of hard-working surveyors and inspectors should be 
denied the privilege of this honorable body, is undoubtedly of record in 
its archives. The pro and con has probably been discussed learnedly at 
monthly meetings, when the little band who constitute the all-year- 
round working force of the association meet about the green table, prior 
to listening to those interesting and animated discussions known only 
to the faithful few who attend. 

As an honorary member of the association, and one requested to con- 
tribute my " say " by your worthy President, whose own able papers 
have given all of us food for reflection during the years following so 
many meetings, I have considered it proper that a plea should be 
entered for the field force of the Union ; that they should be allowed 
membership in this association, and the privilege of participating in its 
proceedings. 

The treatment of the subject taken by me for discussion would be 
disappointing without some words as to the association, and the con- 
sideration given the work of the Union by the association. The more 
active members, and those to whom the annual gathering gives most 
comfort and instruction, are the field men or special agents. 

The connection of the field men with the operation of the Union is, 
as must be plain to any one, most important and of vital consequence to 
the interests and the proper carrying out of the rules of the Union. The 
special agent comes in contact directly with the nine thousand local 
agents whose names appear on the agency registers of the Union. To 
the special agent the local looks for that instruction and advice that 
should enable him to keep without deviation in the path of correct prac- 
tices. To the special he looks for those words of encouragement to 
resist wrong-doing of any kind, and for that broad charity which teaches 
that what is right and just for each one is for the common interest and 
benefit of all. 

To the special, who selects the agent, is given the duty of impressing 
the local's mind with loyalty to Union rules ; to instruction in Union 
requirements ; to pointing out its plan of operation,— so necessary to the 



158 SIXTEENTH ANNUAL MEETING OF THE 

prosecution of a profitable business, — and instilling into his mind that 
respect for law and order and fair dealing that must come from the exact 
carrying out of regulations made solely for mutual advantage, and 
cemented by good faith between honorable men. 

When we consider that, as a general rule, the principal comes more 
closely in contact with the machinery of the Union than the special 
agent, that while the manager or general agent can run around to the 
M compact " office most any time, and that the special on the other hand 
is away on his duties for months at a time, thereby losing that personal 
contact so useful and important, we have another and a strong reason 
why, if only for the brief time of the annual meetings of your associa- 
tion, there should be as close contact as possible with those endeavoring 
to carry out practices most important to success. 

Where then lies the plain duty of the special who comprises so impor 
tant an element in this association ? It is that, even with greater dili- 
gence than his principal, he should cultivate thorough knowledge of the 
rules, and be prepared to uphold the organization by which he is pro- 
tected in the carrying out of his business methods. No one but the 
special agent has the opportunity to explain the even justice of its 
methods, no one more than the special the chance to enroll the army of 
locals as earnest supporters of the ways by which their "bread and but- 
ter" is preserved for them. No one can enlist the support of the local 
agents against adverse legislation, and combine the thousands interested 
in the preservation of rates and rules, as well as he. 

That the w T ork of the special agent in these directions has borne good 
fruit no one can better testify than myself. For that state of mind to 
which the local agent has been brought, whereby he has arrived finally 
at a full appreciation of the benefits of the Union to himself, give all 
praise to the special agent. 

Strange as it might seem, the antagonism of the local agent to the Union 
has been overcome slowly. That such antagonism should exist would 
seem impossible, but it has been a fact. Its disappearance is due to the 
effort of the field man, with the co-operation of the machinery of the Union. 

It is a bold man who will take upon himself the wrath of the local 
agent by attacking the Union at the present time ; and with the insur- 
ance interests of the Pacific Coast, an empire in itself, held by the under- 
writers in the hollow of their hand, with all capabilities for good, the 
greater the knowledge that can be disseminated by its methods and 
practices, its ratings in recognition of improvements in hazards, the 
good to the whole people done by its supervision of fire protection and 
correct practices in municipalities, the greater will be the appreciation 
by the whole people of the necessity for its existence and continuance. 

To further all these ends the association has power, and will, if my 
words will suggest to them the benefit of closer affiliation with those 



FIRE UNDERWRITERS' ASSOCIATION. 159 

who are endeavoring to carry out carefully the best efforts of the com- 
bined underwriters of this great territory, accomplish their purpose. 

Honest endeavor, honest good faith, and pride in fair methods, will 
continue to hold our jurisdiction as an example to any section east of the 
Rockies. 

Tied to no false methods, bound by no superstitious, the underwriters 
of the Pacific Coast can and will be pioneers in every sense of the word. 
With them is bound up the work of "The Association and the Com- 
pact ; " and the honored graybeards of the East can point to no brighter 
or cleaner record. w g DUVAIv 

(Applause.) 

The President — It occurs to me that the Manager of the 
Pacific Insurance Union has only expressed what we have 
been trying to get at for a long time, and that is closer 
relations between this association and the compact. We 
have been trying to have the special agent and his work 
recognized. It seems that the Manager is in entire 
accord with us. 

Our next paper is Hazards of Artificial Illumination, 
by Mr. George P. Low. 

THE HAZARDS OF ARTIFICIAL ILLUMINATION. 

An investigation of the methods of artificial lighting, like studying, 
the development of the metal-working industry, is a retrospection of 
civilization. Way back, ages ago, the primitive man, like the modern 
monkey, failed to realize that his desires would be more fully satisfied 
by lengthening day into night. Accordingly when the sun sank into 
the west, our primitive man emulated the example set and crawled off 
to his hollow log, there to spasmodically sleep, fight off la grippe, or 
to chase away Jersey "skeeters" until morning. A comparatively brief 
existence upon this sphere probably taught him, that the allegation 
that night was made for sleep was not altogether in accordance with 
his judgment. At first the primitive man was a slow goer, and after 
cogitating the matter over for as many generations as we have consumed 
moments, he at last concluded that going to bed with the chickens was 
not quite the proper thing. " If I could devise some means whereby 
darkness would be dispelled," he philosophized, " I could sit up, say one 
hour later each night, thereby virtually prolonging my existence 365 
hours, or fifteen days and five hours, each year, leap years excepted." 



160 SIXTEENTH ANNUAL MEETING OF THE 

How to thwart the early closing movement was for a long time a ques- 
tion that his unplastic mind could not solve, but human nature showed 
its familiar hand : our friend, from a consciousness of his superiority 
over all other terrestrial things, got "the big head," until at last the 
historians of the period credit him with saying, "Am I not lord of 
creation ? All things do my commands ; why should not the sun obey 
my will, and go down an hour later each night?" 

The tradition goes on to say that the primitive man raised himself to 
his full stature and commanded the sun to set an hour later, but Old 
Sol smiled a smile of unusual cross-section, calmly remarked that he 
did'nt propose to break his regular habits for anybody, and betook him- 
self to his occidental couch on almanac time. Thereupon the primitive 
man raved and swore, and club in hand started in to lick the earth, 
when suddenly, as the consequence of the vigorous slashing of wood, 
abetted by the hot spirit and fiery temperament of our hero, the 
splinters burst into flames, the gathering darkness was scattered, and 
wiping the sweat from his brow our primitive man chuckled, strutted 
about, and felt most haughty over his achievement. He thus created 
fire ; fire begat the insurance business ; therefore bow your heads, ye fire 
underwriters, and revere him, your grandfather. 

The period in which man's only means for obtaining fire through the 
rubbing of two sticks was long, and is uninteresting to the business 
man of to-day. Equally unprofitable, if not equally uninteresting, are 
the periods when blazing torches and knots of wood were used, or when 
a higher civilization produced the lamps of Nineveh, Babylon and Troy. 
Then again, if the fire underwriter were transported back to the days of 
Roman glory, and there permitted to enter the temple of the vestal 
virgins, even the sacred lamp that was forever burning on the altar 
would not be the chief attraction of the place. He would say, "Oh, 
bother the lamp !" Let us then leave the history of artificial lighting to 
itself, drag the fire underwriter back from his Roman dream, and get 
down to business. 

The careful student of statistics cannot but feel that cold facts and 
figures are sometimes viewed from a standpoint that makes them appear 
entirely different from the reality. Such a condition is often found 
during an investigation of statistics concerning fifes, their causes and 
the fire loss, which will be mixed up into a jumble, impossible of rational 
comprehension. If a red-hot meteor should fall into and ignite a ware- 
house, and if the fire so started should get beyond control and consume 
property worth a hundred millions, while the fire loss in America from all 
other causes for the year was fifty millions, would it be rational to con- 
tend that the most potent cause of fire is falling meteors? Unreason- 
able as this would be, it is but an exaggeration of a prevalent idea that 
the fire loss on fires due to a particular cause for a given period forms 



FIRR UNDERWRITERS ASSOCIATION. 161 

a reasonably adequate basis for the determination of the rank of the 
cause as a fire producer. In every instance a cause is an incipient fire, 
and whether that fire is extinguished in its incipiency or whether it 
develops into a conflagration depends upon conditions foreign to the 
cause itself; and hence these conditions exert no influence upon the 
cause, and are not to be confounded with it. 

The methods of artificial lighting in use resolve themselves into four 
classes, — lamps and lanterns, gas, candles, and the electric light. With 
the exception of the incandescent lamp all the methods of lighting 
named consist of a flame of interesting structure from whence issues 
light ; but inasmuch as the arc light is virtually surrounded by a glass 
globe, and particularly as it is now being used most generally for outside 
street lighting, and for other reasons that will be apparent, it would be 
well to exclude it from the general class of flame illuminants. In the 
candle and gas jet are found the open flame, while in the incandescent 
electric lamp is realized a light without flame, which is entirely sealed 
in glass, and which has no exposed part that is susceptible to excessive 
heat. 

Statistics show that as fire producers the sources of illumination rank 
in the order given, the first named, or lamps and lanterns, being 
generally more prolific of fires than all other methods combined. The 
reason therefor is easily perceived. Lamps, lanterns and other kindred 
evils must be small and compact, which necessitates the bringing of the 
flame close to a reservoir containing a highly inflammable oil. This in 
itself is a formidable danger, even when the best oil is used ; and for 
proof it is but necessary to refer to the number of lamp accidents and 
upsettings daily reported. The heat from a lamp flame is great, hence 
through both convection and radiation the temperature of the reservoir,, 
together with that of the oil it contains, is frequently raised until an 
invisible vapor is given off. Meanwhile oil is being consumed by the 
lamp, air creeps into the oil chamber and mingles with the vapor, and a 
highly explosive mixture of gases exists. It requires only a spark to 
cause another lamp explosion, when the flying oil is ignited and scat- 
tered in all directions. It is not the oil that explodes, but the invisible 
vapor which is always generated when the lamp heats materially, when 
the lamp is but partially filled or nearly empty, or when the wick is so 
closely woven or fits the tube so tightly as to prevent a sufficient supply 
of oil to the flame. 

These details, though of great importance, are all secondary to the 
quality of oil used ; and, to show what a wretched lot of illuminating 
kerosene is to be found, it is only necessary to state that, of 106 samples 
tested by the Fire Underwriters' Inspection Bureau of San Francisco, 
but forty samples, or a trifle over thirty-seven per cent, were found to be 
up to the legal test. One of these was such a curiosity as to deserve 



162 SIXTEENTH ANNUAL MEETING OF THE 

special mention. Its flashing point was found to be ten degrees 
Fahrenheit, and in order to test it it was necessary to make extraordinary 
exertions to bring it down to a temperature at which it could be used 
with safety. 

The open-flame types of illuminants are confined to candles and gas, 
and it is remarkable how nearly identical are the two methods of light- 
ing ; for each candle is but a dimiuntive gas plant that generates gas and 
burns it on the spot. So far as the open flame is concerned, the fire- 
producing qualifications of each are about equal ; yet the candle 
possesses unfortunate characteristics that would make it a greater fire- 
bug than gas were it used as extensively. When a candle burns down 
the accumulation of melted grease becomes quite inflammable ; and if 
the candle were stuck on a board by three nails, as is often done, a fire 
will almost surely occur. Then candles if left alone will necessarily 
reach this hazardous stage of burned-downitiveness. They are generally 
easily upset, and as they are seldom permanently secured, like a gas 
fixture, careless persons are sure to leave them in fatal places. Again, 
candles, like lamps, are most generally used by the poorer and less 
thoughtful classes, whose wit fails to prompt them to the necessity of 
exerting even simple precautions essential to safety. To offset these 
inherent hazards attending the use of candles, gas presents a danger 
distinctively its own, namely, defective or leaking piping, meters or 
fixtures, with the explosions or fires frequently consequent thereto. 
Moreover, where gasoline gas machines are used, the attending hazard 
is materially increased by the use of gasoline, unless every possible pre- 
caution is taken in installing the plant. Another hazard associated with 
the use of gas presents itself, and that is the necessity for the storage of 
immense quantities of inflammable gas in gas holders, a practice wh'ch 
always causes no little uneasiness whenever a fire occurs near a 
gasometer. 

In brief, then, in all the methods of artificial illumination thus far con- 
sidered, light is the result of combustion ; and in order to produce it 
there must be present : First, some highly inflammable substance, either 
a liquid, a gas or a solid ; and, Second, a flame which is the actual burn- 
ing of one of the three substances defined. A trifling accident occurring 
to any of these forms of illumination may cause direful results ; and it 
will require but a glance at the statistics which will be presented to show 
that these accidents are not only liable to occur, but that they do occur 
with alarming frequency. 

Turning now to the most modern method of illumination, we have in 
the electric light a commodity that is at once the acme of ingenuity, 
utility and safety ; and a discussion of the topic of this paper cannot but 
narrow down to a comparison between lighting by means of lamps, can- 
dles and gas, and electric light. On the one hand is found a method of 



FIRE UNDERWRITERS' ASSOCIATION. 163 

illumination in which light is the direct result of actual combustion, 
necessitating the bringing together of flame and some highly inflam- 
mable substance which entails inherent hazards that cannot be elimi- 
nated. On the other hand, in the incandescent system no combustion 
of any nature takes place, no explosive or inflammable substance is 
required to produce the light, and no open flame exists. In fact it is 
impossible for a fire to originate through the use of a properly con- 
structed and properly cared for incandescent plant. 

With arc lighting, however, a slight hazard exists which is due to the 
fact that the arc lamp is to a certain extent a flame illuminant. To be 
more explicit, the light given from an arc lamp is the result of an arcing 
attending the leaping of the electric current across the separation 
between the carbon points. This arcing is virtually an electric flame, 
and the heat attending its existence is extremely great ; but it is impris- 
oned within walls of non-combustible material, and the carbon points 
are rigidly secured. The current feeding it is not inflammable, neither 
will it explode like gas or kerosene, for the conclusive reason that in the 
arc lamp the flame or arc is not brought into contact with an explosive 
or inflammable liquid, solid, gas or any other ignitable substance what- 
ever. As to interior wires, they are absolutely as free from a fire hazard 
as a metallic picture cord, when, properly placed and cared for. No little 
emphasis must be placed on this remark, as the safety or hazard of any 
electric-light plant depends entirely upon the manner of its installation, 
and upon the care it receives. 

This and other kindred points have, however, been so fully discussed 
in the papers previously read before your association that it is unnecessary 
to do more than allude to the hazards attending the use of improperly 
constructed electric circuits. But let me place unusual emphasis ona. 
statement which I know many will question, namely, that incandescent 
electric-lighting circuits, when properly installed and properly cared for, 
do not present a fire hazard. Lest it be judged that my ardor as an elec- 
trician leads me to err in making a statement so strong, let us see just 
how far statistics bear out my estimation of the relative hazards of 
methods of lighting. 

It is unfortunate that reliable statistics concerning many details that 
would be of inestimable value in the preparation of a paper of this kind 
are not at hand, and if they have ever been compiled I am not aware of 
it. Particularly would it be of interest if we could form a reasonably 
correct approximation of the number of kerosene lamps, lanterns, can- 
dles or gas jets in use at given periods. If such statistics were available, 
comparative tables could be formed from which it would be easy to 
deduce some very conclusive ratios ; but in their absence we must make 
the best of the sources of information at hand. All statistics concerning 
the number of fires caused in the United States by the use of illuminants 



164 SIXTEENTH ANNUAL MEETING OF THE 

have been taken from the " Chronicle Fire Tables" for the six years from 
1885 to 1890, inclusive, while the statistics for San Francisco are from 
the Reports of the Underwriters' Fire Patrol from 1885 to 1891, inclusive^ 
as compiled by Capt. Russel White, to whom, as well as to Messrs. F. 
H. Porter and G. W. Harrison of the Fire Underwriters' Inspection 
Bureau, I am indebted for much interesting information. No figures 
previous to 1S85 are available, but if they were presented it is doubtful 
if the general results would be materially changed. 

Tables A and B. — Showing number of fires caused by artificial illumi- 
nants, together with the percentage of each cause to the whole number 
of fires from all causes (illustrated in Diagram 1), and to the whole num- 
ber of fires caused by artificial illuminants (illustrated in Diagram 2): 



FIRE UNDERWRITERS' ASSOCIATION. 



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FIRE UNDERWRITERS' ASSOCIATION. 167 

In studying statistics it occurs to one that another hazard connected 
with the use of flame illuminants rests in the fact that some means for 
lighting them must always be at hand. Gas is lighted by electricity 
without entailing an iota of danger from the use of electricity as a light- 
ing medium, but not one gas jet in a thousand is so ignited. It may be 
said then that the flame illuminants are lighted with matches exclusively; 
and of all causes of fires the use of matches is one of the most prolific. 
It is extremely difficult if not impossible to estimate even in an approxi- 
mate degree the percentage of match fires that are due to the use of 
matches for lighting the older methods of illumination ; but when it is 
remembered how few are the number of heating appliances in any build- 
ing compared with the number of lamps, gas jets or candles, the extent 
to which matches are used for igniting flame illuminants will be appre- 
ciated. Many fires caused by matches are due to children or rats, but if 
it were not necessary to have matches convenient to almost every lamp, 
gas jet or caudle, the incendiary lucifer would not be as accessible to these 
little mischief makers. Of course other uses of matches cause fires, but 
at a very low estimate fifty per cent of all fires caused by matches are 
due to the necessity of using them for igniting the flame illuminants. 
This hazard of course does not attend the use of the electric light. In 
Table A is shown the number of fires caused by matches in the United 
States, and of which it would be eminently proper to charge fifty per 
cent to the flame illuminants pro rata ; but, in order that no question may 
be raised, no further mention will be made of this matter. 



168 



SIXTEENTH ANNUAL MEETING OF THE 







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FIRE UNDERWRITERS' ASSOCIATION. 169 

Turning to Diagram i we find a pictorial comparison between the dif- 
ferent methods of artificial illumination as fire producers expressed in 
percentages of the whole number of fires occurring each year. Statistics 
for the United States are represented by the broken lines, and not being 
materially affected by local conditions the characteristics there presented 
may be accepted as final and conclusive. It will be seen that the num- 
ber of fires caused by lamp accidents and explosions lead those caused by 
the other illuminants by a marked degree, while gas comes in a fairly 
good second, followed by candles and lastly by electricity, which thus 
captures the "booby " prize as a fire producer. In these characteristics 
a general upward trend will be noticed, which can only be explained as 
a natural result of the hazard in the increased use of illuminants attend- 
ing the increase of population. More especially is this true with the 
flame illuminants ; but while the population of the United States, and 
presumably the use of flame illuminants, increased only a comparatively 
few per cent during the six years under consideration, the electric-light- 
ing industry has increased by perhaps a thousand per cent. In this 
point rests what might be called a "personal error " of these diagrams. 
If it were possible to place the number of fires caused by each illuminant 
upon a basis of unity, then the result would be more fair to electricity 
and certainly more satisfactory in every way. 

What else is to be learned from these angles? First, that the percen- 
tage of fires due to artificial lighting in the United States is really small, 
being but a trifle less than six-tenths of one per cent. Again, though 
gas is perhaps the most extensively used illuminant, yet lamps are far 
more hazardous ; and that such a comparatively small percentage of fires 
are caused by candles is due to the fact that they are now but little used. 
With electricity a steady and continuous rise brought the fire under- 
writer to a realization that steps must be taken to check this strong 
upward tendency ; and as a result the insurance inspection of electric 
circuits was instituted. That it has been productive of beneficial results 
cannot be gainsaid. 

The continuous lines in the same diagram representing the behavior 
of artificial illuminants in San Francisco are more interesting in that 
they portray local conditions. Here again lamps come in ahead of all 
others, causing an annual average of over nine-tenths of one per cent of 
all the fires that occurred during the seven years noted. In 1891 the 
kerosene lamp fairly outdid itself by causing a percentage of 1.117 of all 
fires. In the next two lines it is found that candles and gas have 
changed places from those in which they existed in the United States 
statistics. Here candles caused more fires than gas, and the angles pre- 
sented by these two forms of illuminants are a study. For the first four 
years they keep fairly apace, but in 1889 a remarkable divergence occurs 
that I have tried in vain to account for. At first one would suppose that 



170 SIXTEENTH ANNUAL MEETING OF THE 

a general war had been waged on the gas company, or that the already 
high gas rates had been increased, either of which would result in a 
decreased gas consumption and an increased consumption of other 
illuminants, with proportionate variations in the fire ratio ; but not such 
conditions prevailed, as might be partially proven by the lamp character- 
istic, which shows a lesser proportion of fires for 1889 than for 1888. 
Again, the remarkable jump made by candles during 1889 is peculiar, 
and I have tried without success to convince myself that it was due to a 
society fad for burning candles. In 1890 these two lines approach, and 
in 1891 they again recede in a most unaccountable manner. The trend 
of the gas line, however, shows a gradual falling off, while those of the 
other illuminants gradually increase. Doubtless this indicates the 
inroads made in the business of the gas company by electricity. 

A study of the curve of fires caused by electric lights and wires becomes 
in a measure a gratification to me, as to my hands has fallen the task of 
reducing the electric-light hazard in this city. From 1887 to 1889 the 
line shows a rapid increase in the percentage of electric fires. This con- 
dition tended to alarm the local fire underwriters, which resulted in the 
enforcement of the electrical requirements of the Pacific Insurance Union. 
In 1890 this upward tendency was checked, and statistics for the year 
just closed show that the ratio of increase is broken, and that, in the face 
of the wonderful development of the electric-lighting industry, the tide 
has turned and is now ebbing. Captain White of the Underwriters' Fire 
Patrol is authority for the statement that the four fires charged to elec- 
tricity in 1 891 were needless alarms, and my own knowledge of the fires 
referred to bears out his assertion. Three of them were ordinary con- 
verter burn-outs, while the other was simply a short circuit on a fixture 
caused by bronzing the fixture cord. Had not these needless alarms 
been turned in, the record of San Francisco for 1891, so far as electric- 
light fires is concerned, would have been most gratifying. 

In this connection it may be well to refer to the natural increase in the 
fire hazard attending the use of artificial illuminants ; and, as stated, 
about the only method of estimating this ratio for the older methods of 
lighting is found in the assumption that their use increases directly with 
the population. This, if correct, would indicate that their fire hazard 
would also increase with the population. In 1880 the population of San 
Francisco was 223,959; in 1890 it reached 298,997, an increase of 27.85 
per cent, or an average annual increase of 2.78 per cent. This would, 
therefore, indicate about the theoretical ratio of increase in the hazard 
attending the use of the older illuminants. I have taken the trouble to 
ascertain the actual yearly increase in the amount of the electric-light- 
ing business done in San Francisco during the past seven years, and find 
it to have increased in the ratio of 126, 184, 166, 131, 117, 131 and 136 per 
cent respectively, or an average annual increase of 141 percent. It must 



FIRE UNDERWRITERS' ASSOCIATION. 171 

be evident then that the hazard attending electric-light installations has 
not kept apace with the growth of the industry ; and, if the statistics 
presented were reduced to the basis of unity referred to, it would be 
found that the line for the fires caused by electricity would show a con- 
stant downward trend, while those of the older illuminants would rise 
in about the ratio of the increase in population. Unfortunately, how- 
ever, statistics from which these data may be deduced are not to be 
obtained. 



172 



SIXTEENTH ANNUAL MEETING OF THE 




FIRE UNDERWRITERS' ASSOCIATION, 173 

Diagram 2 is designed to show the proportion which the number of 
fires caused by any artificial illuminant bears to the whole number of 
fires caused by illuminants. At the first glance one is struck by the 
remarkable closeness which exits between the average percentage of 
fires caused by lamps and also by electricity in the United States and 
San Francisco respectively. In the United States, for instance, lamps 
caused 64.24 percent and electricity 4.4 percent of all the fires caused by 
artificial illuminants, while in San Francisco these figures stand 63.09 per 
cent and 4.0 per cent respectively. W e see that in the United States gas 
causes an annual average of over 23 per cent of the fires due to artificial 
lighting, and that candles cause less than 8 per cent, whith proves that gas 
ranks next to lamps as a fire producer. For some local reason yet to be 
explained the conditions are changed in San Francisco, where candles 
lead gas in having 20 per cent to 13 per cent for the last-named illuminant. 
In other respects the characteristics are very similar to those described in 
Diagram 1. 

Here is given abundant and irrefutable proof that all [electric-lighting 
installations taken as they actually exist cause less fires by far than any 
other general illuminant. Can we not hope then that when we have erad- 
icated all the bad and indifferent work, the percentage of electric fires 
will be brought down to zero, and eventually the property owner will be 
assured that he may light his premises without entailing a fire hazard 
thereby. Careful investigation will carry the conviction that in the prop- 
erly constructed and properly cared for incandescent system is realized 
a light without hazard ; and, inasmuch as it is the constant aim of the 
fire underwriter to reduce the fire hazard wherever possible, it would 
appear to be imperative that the placing of such installations, when 
used to the exclusion of all other methods of artificial lighting, should 
be encouraged in every manner possible. That such a course would tend 

to reduce the fire waste can hardly be doubted. 

GEO. P. LOW. 

(Applause.) 

Mr. Wetzlar — There is one proposition connected with 
that which I do not understand. The statistical part of 
course is very clear and very complete. I would like to 
ask Mr. Low, however, not with reference to any particular 
hazard, a question as regards electric lighting. 

In what manner can the sputtering of the electric arc 
light be prevented ? We have lately had in the city of 
San Jose considerable damage occurring from the stuff 
exploding by the sputtering of the electric light, It was 



174 SIXTEENTH ANNUAL MEETING OF THE 

prevented underneath by a plated basket, but the light 
evidently sputtered over the top and the sparks settled 
down upon the buildings below. In what manner could 
that be prevented ? 

Mr. Low — The sputtering of the flame, or flash of the 
arc light, as electricians call it, is due to two causes : 
First, irregularity in the current; and, second, to impure 
carbons. The naming of those causes at once suggests 
the remedy : First, the dynamos should be provided with 
a regulator for the purpose of maintaining a constant 
current ; secondly, the carbons should not be of an inferior 
quality, — perfectly even, perfectly smooth. Those are 
the two remedies that suggest themselves to me at once. 
In relation to the city of San Jose, — you spoke of that 
particularly, — I was down there and noticed that they 
were running their machines without regulators. I 
called their attention to the fact, and had hoped before 
this to have got back there again. That was only one of 
the many things I noticed in San Jose which was defec- 
tive. 

Mr. Carpenter — Is it possible to manufacture carbons 
of that degree of perfection to which you refer ? 

Mr. Low — It is done by almost all of the leading carbon 
companies. Little flickers and flutterings w r ill occur, 
however, and cannot be wholly avoided. 

Mr. Conroy — Is it possible to put a wire net over so as 
to prevent this ? 

Mr. Low — There is one Chicago house that has some- 
thing of that nature ; but for some reason or other, I do 
not know why it is so, they have not become general. 

Mr. Sexton — I would like to ask Mr. Low what propor- 
tion to the total number of illuminants in the city does 



FIRE UNDERWRITERS' ASSOCIATION. 175 

the electric light bear. Is there only one electric light 
to the four thousand gas lights ? These percentages 
hardly prove anything unless we know the total number 
of lights. Is there any way of arriving at the proportion 
of lamp lights, candle lights, gas lights and electric lights? 

Mr. Low — The percentage shows the actual number of 
fires caused, in relation to the whole number of fires 
caused from all sources. It is not brought down to the 
point indicative of the number of fires caused by each 
illuminant, and the number of those illuminants in use. 

Mr. Wetzlar — Mr. Low has been so extremely kind in 
elucidating to the members of this association, in months 
past, the intricacies of the electric light, that I move you, 
sir, in recognition of his eminent services, a vote of 
thanks be extended to him for his kind efforts in our 
behalf. 

Mr. Sexton — I desire to second that motion. 

The President — You have heard the motion, gentle- 
men ; all in favor will signify it in the usual manner. 
Carried unanimously. 

The President — Mr. Low, I take much pleasure in 
tendering to you the thanks of this association. 

Our next paper is by Mr. Edwards on the subject of 
Adjustment Before Loss. 

ADJUSTMENT BEFORE LOSS. 
In my enthusiasm over the election of our worthy President, and in a 
moment of forgetfulness, I accepted his invitation to address you at this 
annual meeting. I had hardly accepted the invitation, however, when 
I regretted the promise, but having assumed the responsibility, and 
recognizing that it is always proper to obey the orders of our captain, 
I began casting about for a suitable topic which might interest you, and 
which at the same time, from my experience, I might be expected to 
discuss with some hope of entertaining, and perhaps instructing, a few of 



17G SIXTEENTH ANNUAL MEETING OF THE 

the members. I thought of course of the familiar and always important 
subjects of Local Agents, Special Agents, Loss Adjustments, and topics 
kindred thereto, Fire Departments and Water Supply, Legislation and 
Taxation, etc.; but these subjects have been so thoroughly elaborated 
upon by such experienced and able writers as Mr. Lowden, our worthy 
President, and Mr. H. M. Grant, our able Vice-President, Messrs. Kinne, 
Sexton, Geo. F. Grant, Chalmers, Wetzlar and others, that I could not 
hope to shed new light upon any of them. 

Looking about for some underwriting subject not threadbare, it was 
my good fortune, if not yours, to unearth something which, though not 
wholly new, I do not remember to have ever heard discussed before 
this association. The duties and qualifications of a special agent have 
been defined and enlarged upon. Who the special agent should appoint 
as local agent, and how he should appoint, instruct and cultivate him 
so as to secure the largest premium income from his agency, have been 
fully set forth to us. How to adjust the loss after the fire, be that loss 
on building, machinery or stock, — when the books are saved or burned, 
and under various other combinations of circumstances, — have been 
fully laid before us and so plainly that "he who runs may read." But 
what to do with the risk after it is on the books of the company and 
before it burns is a subject but little, if ever, considered in our annual 
discussions, — a subject little understood and almost wholly neglected by 
the average special and'adjuster on this Coast. It is this theme that I 
have presumed to lay before you, trusting that the few points here 
thrown out will lead to investigations which will prove as interesting to 
you as they are startling to me. 

The novice or young special usually begins his career by a close study 
of the Kinne Rule, Sexton Rule or some other rule of loss apportion- 
ments, and, comparing the merits of each, muddles his brain with 
illustrative figures until he can think of little else. It is well, of 
course, to have some knowledge on this subject, but it is beginning at 
the wrong end, and wasting valuable time on something that he may 
never be called upon to apply. When he thinks he has mastered the 
subject of apportionment he then takes up adjustments, and studies all 
of the authorities at his command until in his opinion the subject is 
mastered. He then graduates himself with the degree of M. A., ready 
to take his stand with his brothers in the profession, and feels that he 
is fully equipped for the battle, when in fact he is ignorant of the first 
and most important branch of his work. He is a carpenter shingling a 
roof before he has laid the foundation for the house. He may, however, 
with further experience (which generally comes high) direct his atten- 
tion to the vitally important matter of the condition of the risks that 
he, through his "solid" locals, is placing on the books of his company. 
From an ugly loss, one that manifestly could have been avoided by close 



FIRE UNDERWRITERS' ASSOCIATION. 177 

inspection at an agency but recently visited, he may garner a few points 
that will make him more practical, and cause him to forget or discard the 
theoretical part of his starchy new wisdom. 

The work of a special agent is best judged by the loss ratio of his 
company, barring general conflagrations. If it is high he must shoul- 
der his share of the responsibility ; if it is low he shares the credit with 
his manager, and is valued accordingly, not alone by his principals, 
but by others who may have occasion to make inquiry into his merits. 
The surest way to attain this desirable low loss ratio, so far as the 
special's services can contribute thereto, is the close inspection in detail 
of every risk on the books of his company at each agency visited, and a 
conscientious enforcement of his judgment on each individual risk. 
The special should never consider any detail of the inspection too 
trivial. The fatal defect may be concealed in most unexpected quar- 
ters. Scrutinize everything, let no corner escape you, and do not be 
deterred by the objections, indifference, or possibly the affront, of the 
assured. It is safe to assume that there is something radically wrong 
when the assured seeks to obstruct or prevent a thorough examination 
of any part of his risk. You will pardon me if I give here an illus- 
tration of the superficial inspection common on this Coast. A promi- 
nent local in one of our country towns has a contingent commission 
contract with one of his companies. He secured what he thought to be 
a desirable risk, amount five thousand dollars, which he placed in his 
contingent company. After writing the policy he made a more thorough 
examination of the risk and discovered some very objectionable features, 
aud concluded that he would not endanger his contingent profit with the 
risk, so canceled it and replaced it, one-half each in two of his other 
companies. It was not long until the specials of these two companies 
paid him a visit ; and to ease his conscience he called their attenion to 
the risk in question. They walked around it, looked wise, pronounced 
it A-i, and solicited more of the same kind. In less than one month 
thereafter the risk burned, and the fire originated from the defects 
discovered by the local agent. A thorough and systematic inspection 
of that risk would have revealed to these specials the fatal defects dis- 
covered by the local, and saved to their companies an amount equal to 
their annual salaries. 

The causes of fires are almost numberless. Many of them cannot be 
foreseen by the wisest, most thorough and experienced inspecting 
adjuster whom we have under consideration. But the number of causes 
which may be foreseen, and prevented by a careful and intelligent 
inspection, is a surprisingly large one, according to statistics, which I 
herewith present you. They abundantly prove that the good inspecting 
adjuster before the fire is of far more value to the company than the 
most experienced and acute loss adjuster after the fire. 



178 SIXTEENTH ANNUAL MEETING OF THE 

I employ the term inspecting adjuster advisedly. To become an 
adjuster in this liberal sense it is not merely necessary to understand 
the intricacies entering into the determination of the damage after the 
fire. The inspecting adjuster determines before the loss all things 
required of the adjuster after the loss, and more, — he adjusts the 
assured, and thereby prevents many losses and saves money for his 
company. This is the best salvage, Adjust the policy to the risk, and 
the assured to both, before the fire, and the office-boy can settle the loss, 
when total, after the fire. 

It is a common occurrence with experienced adjusters to adjust the 
policy to the risk after the fire, making it cover as was intended by 
the assured and the agent who wrote it. Sometimes, however, the 
adjuster declines to thus adjust the policy to the risk, and properly 
insists upon settling the loss according to the letter of the contract, most 
always causing trouble, and many times resulting in the courts being 
called in to compel the reformation of the policy. Courts are very 
jealous of the rights of the assured, and they make decisions which the 
underwriter regards as harsh and in violation of the policy contract. 
Much of this expensive and prejudicial litigation might be prevented 
by a proper understanding of the property covered, and a corresponding 
wording of the policy before the fire, gained by inspection. 

One of our oldest and most competent adjusters, now promoted to the 
managerial chair, Mr. William Sexton, will tell you, "In case of loss, 
first adjust the assured, then adjust the policy ; and the loss will take 
care of itself." I fully agree with William, but I would prefer to adjust 
the assured and the policy before the fire, and thus often prevent the 
loss. 

The inspecting adjuster, in adjusting a policy to the risk, and the 
assured to both, before the loss, must determine many things relating 
to all three. The value of the property must be ascertained, and in 
doing this he must take into account the cost of construction or pro- 
duction, the uses to which it is applied and its adaptability thereto, its 
age, usage and depreciation, if any, in consequence thereof, its location 
in relation to the occupancy, and everything, in fact, laid down in the 
accepted rules for determining loss after the fire. 

While adjusting the assured you must remember that it is not always 
safe to intrust property-owners with the policies of your company. A 
careless, unsystematic man is a good subject to avoid. A very large per- 
centage of the known causes of fire is from carelessness, and a much 
larger percentage of the unknown causes may be attributed to the same 
thing. 

The important things to ascertain when adjusting the assured are 
embodied in the following questions : Is he careful ? Is he systematic 
in his business ? Does he keep a proper set of books from which may be 



FIRE UNDERWRITERS' ASSOCIATION. 179 

learned the value of his stock ? Is he prosperous ? Is he satisfied with 
his present business and location, or is he looking out for a change ? Is 
he hunting a buyer for his property ? If so, he may sell to you if you 
give him a favorable opportunity. 

" Adjustment before loss " might be summarized in the following direc- 
tions : Adjust the policy by seeing that it is properly written to cover 
what was intended without ambiguity. Adjust the property by seeing 
that it complies with the printed conditions of the policy. Adjust the 
assured by seeing that he understands the proper meaning of insurance 
and his contract of indemnity. 

In view of the large and increasing fire waste of recent }^ears, under- 
writers are casting about for a remedy, — something that w T ill check the 
great drain upon their resources, and turn a losing business into one of 
profit. Among other things considered is that of closer and more thor- 
ough inspections ; and the inspecting adjuster who is most proficient in 
his work will be in greatest demand. The able adjuster after the fire has 
been regarded with most favor in the past ; but as time rolls on and the 
march of progress in underwriting, as in everything else, leads to 
improved methods, the inspecting adjuster will come to the front and 
relegate the "old liner" to second place in the procession, and possibly 
to the entire rear end ; and it may be that he, like Othello, will find 
11 his occupation gone." 

To show the vast field open to the intelligent and conscientious inspect- 
ing adjuster, and the possibilities for good work therein, I have prepared 
a table showing the percentage of fires which may be considered pre- 
ventable, and the amount of insurance loss sustained thereby during the 
past seven years ending January i, 1890, as shown in the " Chronicle Fire 
Tables" for 1891. The percentage of fires from each cause as shown 
herein are the figures as they appear in the Chronicle tables; but, as 
there is no tabulated statement in these tables showing the amount of 
insurance loss upon the various classes of property from each cause of 
fire, I have assumed that the loss from these causes bears the same pro- 
portion to the total insurance loss as the causes enumerated herein bear 
to the total number of fires. In these tables I have grouped together as 
nearly as I could the various classes of risks similar in character and 
with hazards in common. These tables will be printed with this paper 
and will be easily accessible to the interested, so I will not weary your 
patience by reading all of them, but will beg your indulgence while call- 
ing your attention to a few of the items and the totals of each group. 



180 



SIXTEENTH ANNUA!, MEETING OF THE 



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186 SIXTEENTH ANNUAL MEETING OF THE 

In the table embracing manufacturing risks I have enumerated, as the 
preventable causes of fires which may be materially reduced by intelli- 
gent inspection, the following : Incendiarism, spontaneous combustion, 
sparks, stove pipes and flues, stoves and furnaces, friction, defective kilns, 
steam pipes, ashes and gas jets, and made up my tables to include losses 
from these causes only. 

IRON WORKERS. 

The first group contains iron workers, embracing carriage and wagon 
factories, foundries and machine shops, blacksmith shops and cutlery 
and edge-tool factories. Seventy-one per cent of the total insurance loss 
on iron workers was from the causes herein enumerated, involving a loss 
to the companies of $8,006,080. Of the total loss on carriage and wagon 
factories, incendiarism is responsible for twenty-eight per cent; spontan- 
eous combustion sixteen per cent ; and sparks fifteen per cent ; wmile 
sparks are responsible for thirty-one per cent of the foundry and machine 
shop loss, and forty-four per cent of the loss on blacksmith shops. 

WOOD WORKERS. 

The second group includes wood workers, embracing agricultural 
implement, box and furniture factories ; planing, molding, saw, stave 
and shingle mills and others. These added $15,784,000 to the insurance 
loss from the above causes, or sixty-three per cent of the total insurance 
loss on this class of risks. From a close study of the causes of fires in 
wood workers, the inspecting adjuster will find ample scope for an 
intelligent application of his abilities. Incendiarism caused twenty- 
eight per cent of the fires in agricultural implement factories ; tw T enty six 
per cent in planing and molding mills, and thirty per cent in saw, stave 
and shingle mills ; while sparks corns in a good second with twenty per 
cent in box factories ; twenty-five per cent in planing and molding 
mills ; twenty-two per cent in sash, door and blind factories ; and twenty- 
four per cent in saw, stave and shingle mills. A reduction of insurance 
to the proper proportion of value, and the application of spark arresters 
to smoke stacks, would have done a good work in behalf of insurance 
companies on these risks. 

FLOUR MILLS AND GRAIN ELEVATORS. 

The insurance loss from these causes was $14,565,000, being seventy- 
four per cent of the entire insurance loss on this class of property. The 
incendiary caused forty-four per cent of the flouring mill, and twenty- 
four per cent of the grain elevator, fires ; while friction is responsible for 
twenty per cent and eleven per cent respectively. Some portion of this 
large percentage of incendiary fires in flouring mills is probably due to the 
introduction of the roller process and other improved machinery for 
making flour. It was cheaper to burn and rebuild with the proceeds of 



FIRK UNDERWRITERS' ASSOCIATION. 187 

insurance than to change the old machinery for the new. Proper inspec- 
tion with a due regard for insurance in proportion to value, experimental 
ventures and ventures by inexperienced men, would have removed the 
incentive ; and careful examination of the friction feature would have 
materially reduced the loss on this class of risks. 

WAREHOUSES. 

General and grain, cotton, hay, paint and oil and tobacco warehouses. 
The insurance loss from these causes was $5,706,000, or fifty -four per cent 
of the whole insurance loss on warehouses. The proportion of the losses 
on this class of property chargeable to incendiarism is well calculated to 
cause the underwriter some concern. The figures are as follows : General 
and grain thirty-seven per cent ; cotton twenty-nine per cent ; hay sixty- 
eight per cent ; paint and oil twenty -two per cent ; and tobacco sixty- 
eight per cent ; which is an average of more than fifty per cent of the 
whole. 

PAPER WORKERS. 

The insurance loss on this class of risks from the causes enumerated 
was fifty-three per cent of the whole, or $5,706,000. The greatest enemies 
to this group were incendiary and stoves and furnaces, being twenty- 
eight per cent each on paper-box factories, and eighteen per cent and 
twenty-five per cent on paper and pulp mills. 

LEATHER WORKERS. 

The insurance loss from these causes was $6,747,000, or sixty-eight per 
cent of the whole loss on this class of property. These risks had a 
peculiar attraction for the incendiary, as he is responsible for twenty-four 
per cent of the loss on boot and shoe factories ; twenty-six per cent on 
harness and saddle factories; and thirty-one per cent on tanneries ; while 
spontaneous combustion ranks next with five per cent, thirteen per cent 
and ten per cent respectively, to its credit. 

BREWERIES AND MALT HOUSES AND MILLS. 

The insurance on these risks and for the causes enumerated was $1,823,- 
000, or fifty-three per cent of the whole insurance loss. The cause of fires 
in breweries is pretty equally divided between incendiary, spontaneous 
combustion, sparks, stove pipes and flues, and friction, being fourteen 
per cent, six per cent, ten per cent, six per cent and nine per cent, 
respectively. 

BRICK AND TILE FACTORIES AND POTTERIES. 

The insurance loss was $944,000, or seventy-one per cent of the whole. 
In this group defective kilns and incendiarism are the great enemies. Of 
fires in brick and tile factories thirty-seven per cent is chargeable to the 



188 SIXTEENTH ANNUAL MEETING OF THE 

former, and sixteen per cent to the latter ; while on potteries it is thirty 
per cent and twenty-two per cent, respectively. 

COTTON AND WOOL WORKERS. 

The insurance companies paid $9,604,000 on this group and from these 
causes, or seventy-one per cent of the whole insurance loss. In this class 
friction appears to require the greatest attention, as it causes fifty-two 
per cent of the fires in cotton-goods factories ; thirty-nine per cent in 
woolen mills ; and forty-six per cent in worsted mills ; while the incen- 
diary destroyed thirty-three per cent of the shirt and twenty-five per cent 
of the hat and cap factories. 

PACKING AND SLAUGHTER HOUSES AND SOAP AND CANDLE FACTORIES. 

The insurance loss was $3,006,000, or fifty-five per cent of the whole. 
The incendiary leads in the destruction of this group, having br.rned 
twenty per cent of the packing houses ; fifty per cent of the slaugh- 
ter houses ; and twenty-four per cent of the soap and candle factories. 
Ignition of grease destroyed twenty-three per cent, ten per cent and 
twelve per cent, respectively. The obnoxiousness of this class of risks 
to neighborhoods is undoubtedly responsible for many of these incen- 
diary fires. 

M ISCELLANEOUS. 

Under this heading I have grouped a large number of special hazards, 
some of which are not manufacturing risks. The insurance loss from the 
causes named was $7,596,000, or fifty-one per cent of the whole, in which 
the incendiary is again quite prominent, having destroyed thirty-nine 
per cent of the canneries ; thirty-three per cent of the cheese and butter 
factories ; forty per cent of the distilleries ; thirty -three per cent of the 
fertilizing and phosphate works ; twenty-four per cent of the bottling 
works ; forty-eight per cent of the tobacco factories ; and greatest of all 
sixty-seven per cent of the quartz mills. Quartz mills, with a non-pro- 
ductive mine and a large insurance, are evidently very combustible. 
Spontaneous combustion, stove pipes and flues, stoves and furnaces, and 
friction, each contributed largely towards the destruction of these risks. 

OPERA HOUSES, THEATERS AND PUBLIC HALLS. 

The insurance loss was $1,878,000, or fifty-one per cent of the whole. 
Opera houses and theaters have a record of thirty-one per cent incen- 
diary ; thirteen per cent spontaneous combustion ; and six per cent from 
gas jets ; while public halls record twenty-one per cent incendiary 
losses ; fifteen per cent stoves and flues ; and four per cent from gas jets. 

HOTELS, BOARDING HOUSES AND RESTAURANTS. 

This class of risks has proven an expensive luxury to the insurance 
companies, as they paid from the causes herein enumerated the large sum 



FIRE UNDERWRITERS' ASSOCIATION. 189 

of $11,549,000, or sixty-four per cent of the entire insurance loss. Among 
the numerous causes of fire in these risks eighteen per cent of the 
boarding-house losses, thirty-one per cent of the hotel losses, and 
twenty per cent of the restaurant losses, were due to stove pipes and 
defective flues. Twenty-seven per cent of the hotel loss must be 
charged to the incendiary account. 

PUBIvIC STABLES. 

The insurance loss was $2,542,000, or sixty per cent of the whole. 
Fifty-nine per cent of the entire livery stable loss is charged to incen- 
diarism ; while forty-one per cent of the railroad stables is due to the 
same cause. 

SALOONS AND LIQUOR STORES. 

The insurance loss was $2,010,000, or forty-nine per cent of the whole. 
Twenty-seven per cent of the total loss on billiard saloons, seventeen 
per cent on wholesale liquor stores, and thirty per cent on retail liquor 
stores, are of incendiary origin. 

STORES. 

In this group I have included all classes of wholesale and retail stores. 
The loss to the insurance companies from the causes above considered 
for the seven years was $56,532,000, or fifty-seven per cent of the entire 
insurance loss on this class of property. Among the causes of fires 
which produced these losses the incendiary figures most prominent. On 
the single item of country stores and general merchandise fifty-eight 
per cent of the losses were of incendiary origin, and amounted to the 
enormous sum of $11,000,000, enough on this one class of stores to pay 
a handsome dividend on the entire capital invested in the fire insurance 
business in America. 

If the companies would insure only such of this class of risks as would 
be subject to inspection at least yearly, enough could be saved thereby 
to employ an army of intelligent inspecting adjusters, aside from the 
work they would do in reducing the losses from other causes. Country 
stores, however, are not the only class of stores that suffered from this 
cause. Of the losses on agricultural-implement stores sixty per cent 
were incendiary ; coal and wood yards twenty-five per cent; furniture 
and undertakers twenty-six per cent ; lumber yards forty-six per cent ; 
harness and saddlery thirty-seven per cent ; feed stores forty per cent ; 
boot and shoe stores twenty per cent ; retail grocery stores twenty-seven 
per cent ; hardware twenty-two per cent ; and clothing stores twenty 
per cent. 

It is difficult to comprehend the vastness of the field open here to the 
inspecting adjuster, but the insurance companies cannot realize upon 
the full benefit of his work without the active co-operation of the man- 
agers themselves. Risks remote from agencies and beyond the reach 



190 SIXTEENTH ANNUAL MEETING OF THE 

of the inspecting adjuster should be declined. The pernicious practice 
of permitting other insurance without limit on all stocks and buildings 
should be eliminated from the business. Without these safeguards the 
good work of the inspecting adjuster will be largely neutralized. 

DWELLINGS, BARNS, CHURCHES, COLLEGES, COURTHOUSES, LODGE 
HALLS AND SCHOOLHOUSES. 

These risks are considered by the average underwriter as the most 
desirable of all risks written. The causes of fires in this group which 
I have considered preventable are incendiarism, stove pipes and flues, 
stoves and furnaces, ashes and gas jets. The insurance loss on this class 
of risks from these causes was forty-six per cent of the entire insurance 
loss, or in round numbers $29,528,000. Of this amount $17,753,000 was 
on dwellings and their contents. Eleven per cent of the fires in dwell- 
ings was incendiary ; while twenty-three per cent was from stove pipes 
and defective flues. 

Dwellings are usually inspected from a buggy seat or at best from the 
front gate. Occasionally one of our more careful specials will walk 
around to the rear of the house and count the stove pipes ; but how few 
of them examine the pipes and flues or make inquiry as to the length 
of time they have been in place. Inspecting adjusters could save 
millions of dollars annually to the companies by carefully looking into 
the age and condition of stove pipes and flues. Not alone should 
pipes and flues in dwellings demand their attention, but every risk 
wherein they are in use should receive his careful scrutiny. 

The total insurance during the seven-year period embraced in the 
Chronicle tables on the risks classified in these tables was $323,091,000. 
Of this amount $186,013,000 was from causes enumerated in this paper, 
and which I have classed as preventable. It would of course be impos- 
sible to prevent all of these losses, but a careful study of the causes of 
these fires, and a systematic and thorough inspection upon ascertained 
lines, would greatly reduce the number of fires and save vast sums of 
money to the companies. 

I had outlined a few hints as to methods of inspection, or how to 
inspect various classes of risks, and where to look for the lurking dan- 
gers, but I found that this paper was already too long, so laid them away 
for future reference. 

Trusting that I may have suggested a thought or advanced an idea 
that will be of benefit to my coworkers I bring this article to a close. 

L. B. EDWARDS. 

(Applause.) 

The President — I think we will all agree that Mr. 
Edwards has suggested some excellent thoughts in his 



FIRE UNDERWRITERS ASSOCIATION. 191 

paper. The amount of work left undone is something 
startling. 

Mr. H. M. Grant— I think, Mr. President, Mr. Ed- 
wards has given us one of the best papers for the infor- 
mation of the special we have ever had; and, if specials 
would take to it, and the underwriters would follow it out 
strictly, there would be great improvement. And, if we 
had enough money on hand, I would like to see this paper 
in the hands of every special. Of course it will be in 
their hands through the printed minutes ; but it seems 
to me to be worthy of very careful study by the special 
and underwriter ; and, if it is possible to have the paper 
specially printed for the different ones, I would like to 
see it done. 

Mr. Wetzlar — I am afraid our friend Edwards has 
drawn such high ideas of his inspecting adjuster that, 
if they were to be carried out, the books of the companies 
doing business to-day on the Pacific Coast would be 
depleted of any business. In other words, I mean to say 
that, carried out, the ideas advanced in his paper would 
simply mean giving up nine-tenths of the business. No 
doubt our friend Edwards is correct, but in practice the 
thing won't work ; and, if we are going to appropriate 
any sum for publication, I think all the papers that have 
been read, to which I have had the pleasure of listening, 
are worthy of publication. 

The President — Mr. Grant's suggestion is a very good 
one, but I am sorry to say that the prospect for anything 
in the matter of funds is not very bright. We have had 
considerable expense. The printed proceedings this year 
will entail a greater expense than ever before. Unless 
we can increase our membership very greatly during the 
coming year we will have all we can do to pay our debts. 



1 92 SIXTEENTH ANNUAL MEETING OF THE 

Mr. Grant — I suppose that is true, and, as Mr. Wetzlar 
says, a good deal of it would be impracticable. 

Mr. Kinne — I understand that the paper will be pub- 
lished in our regular proceedings, and those that desire 
can read it then. 

Mr. Watt — The suggestions made by Mr. Edwards are 
so eminently correct and proper, that I imagine our 
friend Mr. Wetzlar is afraid that the special agents would 
adopt them and hence do away with his occupation. 
(Laughter.) 

Mr. Folger — It seems to me that, if the special has 
his wits about him, he can supply statistics to the young 
man who wants them in the country, without having 
them in his pocket, and have them at his finger's end. 

Mr. Dornin — Mr. President, in our discussion at one 
time when Sexton and myself were associated together, 
I suggested the propreity of arming our special agents 
with an improved kodac, which should accompany each 
inspection slip. Now he says " Don't, the less we 
know about the majority of our risks the better we are 
off." It will be a great deal more comfortable to you as 
manager to just look at a nice diagram and pass on a 
risk from that point of view. 

Mr. Wetzlar — There is one thing I would like to ask 
Mr. Edwards, and that is what standard of salary he 
proposes to adopt for his adjuster. The qualifications 
certainly would require as munificent a salary as most 
of the managers are now receiving. 

The President — To close the long list of valuable 
papers with which we have been favored, we have a very 
suggestive one by Mr. George D. Dornin. He asks a 



FIRE UNDERWRITERS' ASSOCIATION. 193 

question, and I presume he can answer it, — After the 
Compact, — What? 

Mr. Dornin — Before commencing my paper I think I 
ought to say, after listening to that very interesting 
paper prepared by General Manager Duval as to the re- 
lations between this association and the compact, that it 
was not concerted action between himself and myself 
which led to the preparation of this paper. I did this of 
my own free will and accord. I had a more comprehen- 
sive title, to which I thought I would work up a paper. 
The title was something like this, The Trinity of Under- 
writing, — Agnosticism, Intuition and Luck, but I thought 
that would be altogether too suggestive, and rather of- 
fend those of us who think that underwriting is an exact 
science, and I would fall back on something which 
would be more agreeable to you; and so I adopted the 
title as being suggestive of our present situation. 

AFTER THE COMPACT, —WHAT ? 

Two significant facts, drawn from the underwriting experience of our 
brethren in the East, suggest the topic which shall be the burden of the 
paper which by invitation of our worthy President I shall place before 
you to-day. 

These are, first, the retiring from active business of eighty-two com- 
panies during 1891, carrying out of the market assets amounting to 
$20,184,638, and a call issued by a considerable number of the general 
agents and managers in Chicago, "to consider the unsatisfactory condi- 
tion of the fire insurance business in the Central States, and measures 
looking to the restoration of a measurable degree of prosperity." 

In a remote sense only are we immediately concerned in the affairs of 
our brethren in the East, but we may, as thoughtful men, draw lessons 
from impending examples ; turn from them to the conditions in our own 
household ; consider the advantages arising from our own compact sys- 
tem ; the disadvantages we shall all labor under if relieved of its binding 
force ; and, as representing the active field workers, how we may lend our 
individual aid to correct the irregularities so constantly complained of, 
where they actually exist, and thus strain the integrity of the Union. 

While our Eastern brethren are casting up the results of an adverse 
year, and considering measures to bring about a reasonable degree of 



104 SIXTEENTH ANNUAL MEETING OF THE 

prosperity, we of the Pacific division have gotten through the same year 
with, in the aggregate, a fair measure of profitable results. While, in a 
large degree, these are due to the growth and development of the terri- 
tory under its jurisdiction, and consequent accession of new business, 
it is nevertheless true, in a still larger degree, that we are indebted to the 
Pacific Insurance Union, its binding rules and tariffs, for the aggregate 
results. Undoubtedly individual management in the selection and dis- 
tribution of risks, minimizing the cost of obtaining business, are very 
important factors ; but, as no company can expect to obtain a rate much 
above the market, so the regulation by some central authority, and upon 
a well-defined system, of an average price which will insure a profit, is 
essential to success. 

Our Eastern brethren (and I now refer especially to that portion under 
the jurisdiction of the Union of Chicago) are confronted with a large and 
powerful minority of companies, which for reasons of their own hold aloof 
from the Union, and a still more numerous yet less influential body of 
minor companies, mutual or undergrounders in their character, which 
tend to disturb the efforts of the greater organization to maintain a regular 
standard of rates and rules of practice. The effect of the competition, 
added to the efforts put forth for the betterment of risks, ihus lessening 
the tax on thrift which insurance imposes, has steadily pushed down the 
rate, until less than five per cent marks the margin between profit and 
loss. 

The complete figures upon which to make up the disastrous results of 
1891 are yet needed to show in exact form the underwriting record for the 
year ; but we may turn to the figures of 1890, reminding you at the same 
time that 1890 was considered a fairly prosperous year in the United States. 
These figures are taken from the annual address of Mr. D. A. Heald, 
President of the National Board of Underwriters, in May, 1891, and 
show the underwriting profit of one hundred and forty-four companies 
for the year 1890 : 

Fifty New York national compa- 
nies wrote $27,789,719 

Giving an underwriting profit of $871,456, or 3.13 per cent. 

Seventy-four companies of other 

States wrote 53,57 2 >663 

Profit 3,468,175, or 6.47 per cent. 

Twenty-four foreign companies 

wrote 33,864,964 

Profit 706,686, or 2.15 per cent. 

Showing a grand total of ... . $114,227,076 

Total profit $5,046,317, or 4.42 per cent. 



FIRE UNDERWRITERS' ASSOCIATION. 195 

The combined results of 124 American companies from the date of 
their organization to December 31, 1890, as taken from the sworn state- 
ments on file with the New York State Insurance Department, show 
their underwriting profit to be only 3.47 per cent, and the margin of 
profit has been steadily decreasing for years. These are figures given 
by the surviving companies, and do not include the much greater num- 
ber which during the two decades ending with December 31, 1891, re- 
tired altogether from business. 

From the most available sources we make these figures as follows: 
From January, 1871, to December 31, 1891, 595 stock and mutual fire in- 
surance companies have retired from business in the United States : 

No. Capital. Assets. 
Companies failed in consequence of the 

Chicago fire 52 $i6,i35>937 $27,164,432 

Companies failed in consequence of the 

Boston fire 26 6,725,000 15,786,003 

Mass. companies not included with above 16 5,400,000 3,599,210 

Connecticut 5 1,700,000 2,976,033 

Rhode Island 5 95°,ooo x , 397, 052 

New Hampshire 6 230,000 369,701 

Maine .... 1 201,520 340,701 

New York 62 14,037,000 22,604,975 

Pennsylvania 16 2,314,240 4,138,383 

$47,693,697 $83,376,490 
Foreign companies retired from U. S. 

and assets at time of retirement ... 9 ... 4,213,141 

Total 193 $47,693,697 $87,589,636 

The assets of seventy-three companies which failed in consequence of 
the Chicago and Boston fires were entirely wiped out of existence. In 
addition, a number of companies continuing in business made heavy 
assessments on their stockholders. 

Record of the Reinsured, Failed and Retired.— In addition to the 
above list 397 stock and mutual companies, stock companies located in 
other States and Territories retired from business either by failure or rein- 
surance. I do not give their assets, as I have not the complete figures, 
but they would foot up more than $50,000,000. The total record is as 
follows : 

Reinsured 2 3 T 

Failed ] 9 2 

Retired 6 5 

Uncertain, but being small Western mutuals, probably failed ... J57 

Total 595 



196 SIXTEENTH ANNUAL MEETING OF THE 

It will be understood that the figures which I have cited embrace the 
entire United States business. 

From these disheartening results let us turn to our own Pacific Coast 
jurisdiction. 

The membership of the Pacific Insurance Union has, with the excep- 
tion of the Armstrong Mutuals, whose dramatic retiracy, after throwing 
the burden of their enormous liabilities into the bosom of confiding 
Albion, thus closing a peculiarly sensational career, embraced every 
company doing business on the Pacific Coast. 

It is well understood that the retiracy of any member carries with it 
the power on the part of the General Manager l ' to reduce rates in the 
presence of competition from companies not connected with the Union," 
and that it has been distinctly asserted, and is a matter of record, that a 
number of large and influential companies will not remain in member- 
ship with the Union if any important company or companies remain 
outside. In other words, the anomaly of the old Board of Underwriters 
often years ago maintaining a high standard of rate, while equally 
respectable companies in another organization discounted this tariff, and 
still another class of free lances existed, but swearing allegiance to 
neither Board, will not again be permitted. 

The foundation stone of the Union is equality of membership ; its 
cause is a common one ; the smallest as well as the largest company is 
involved in its maintenance ; indeed I may go further and say that the 
small company has a greater interest in its perpetuity than its greater 
neighbor, whose larger revenue is not entirely drawn from the jurisdic- 
tion of the Union. Thus far I have alluded only to the maintenance of 
rates, and it is not my purpose to more than touch upon the equally 
important work of the Union in procuring the betterment of risks ; the 
proper forms of policies ; the improvements in fire departments, etc.; 
the regulation of the vital question of compensation to agents and 
brokers. All these are important factors, but do not for the present need 
more than these passing references. 

The volume of business transacted within the territory of the Union in 
1 89 1, as given us through the Coast Review, was 111,610,390, an increase 
in round figures of $5,000,000 since the organization of the Union. 

When we consider that the entire premium revenue of all the Pacific 
States and Territories, including Colorado, New Mexico and Wyoming 
(which are not tributary to the Pacific Insurance Union), is very little, if 
any, more than the premium revenue of the single State of Illinois; that 
its development and maintenance necessarily involves a much larger 
ratio of legitimate expense, — it must follow that the conservation of 
legitimate rules of expenditure, to establish which we invoke the aid of 
the Union, should be heartily and emphatically supported, in word and 



FIRE UNDERWRITERS' ASSOCIATION. 197 

deed, by every one who believes that in these as in all other details good 
management is involved. 

Since the organization of the Union in 1884, the aggregate revenue 
from the territory within its jurisdiction has been $67,490,563, and losses 
within the same period $32,409,326, or forty-eight per cent. If to these we 
add an average expense ratio of thirty-five per cent (and that this is a low 
estimate with many agencies, the records of many companies will show) 
we have an average apparent profit of seventeen per cent. Mr. Folger in 
his able paper read to us yesterday places the average expense ratio at thirty- 
seven and one-half per cent. This would indeed be a satisfactory showing 
if we lost sight of the fact that this underwritng profit is more apparent 
than real. The steadily increasing volume of business, incident to the 
opening of new fields and increasing property values, upon which the 
loss record has not taken effect, is apt to blind us to this incident in our 
business. When as in the older States, by reason of betterments in 
risks, increasing competition, and the absence of restraining boards or 
compacts, business has reached its level, and the natural laws of average 
affecting loss ratios are beginning to be felt, it is fair to anticipate tha:, 
even in our more favored field, we shall see our profit account drawing 
nearer the dead-line. How then shall we avert the danger to the organ- 
ization which conserves the interests of the underwriters of the Pacific? 

It is a foregone conclusion that no individual company, however 
strong it may be in financial standing, popularity or executive manage- 
ment, can be far above the market. The aggressiveness of the more 
feeble competitor will necessarily be met forcibly, not only with the 
reduction in rates, but in the added cost of commissions and field 
expenses. While we are all nominally members of a compact pledged 
to (and we do) theoretically observe its rules and rates, excessive com- 
missions and rebates may in the mass be unfelt, but when all are on the 
same plane, and free of restraint, "open and free competion" will 
speedily bring all companies on a level. 

Is the compact in any danger of disruption ? I emphatically say,— 
yes. From time to time crises have been reached and tided over, not 
so much because reforms have been effected, but because the better 
judgment of the majority has determined that the cost of disorganiza- 
tion would be so enormous as to invite every effort to its maintenance; 
but how long can the complaints of bad faith go on without snapping 
the slender ties which hold us together. It must be remembered that 
among the members of the Pacific Insurance Union are representatives 
of companies which elsewhere hold aloof from all boards or compacts. 
Among those are some of the largest of American and English com- 
panies. I am personally aware that correspondence has from time to 
time passed between head offices and the agencies here, looking to the 
withdrawal from the Union because of alleged bad faith and flagrant 

F. U. A. 13. 



198 SIXTEENTH ANNUAL MEETING OF THE 

violations of Union rules, particularly those pertaining to commissions, 
brokerage and rebates, by other companies. 

It is not so long since that a resolution of the Executive Committee, 
practically suspending the tariff in San Francisco and Oakland, brought 
together the entire membership of the Union, who, with anxious faces, 
listened to the arguments pro and con upon a motion to lie over for 
furture action a measure which would have practically terminated the 
existence of the Union as an active element in Coast underwriting. That 
heroic measures are sometimes necessary to cure severe maladies I fully 
believe; but in our present discussion may we not, in diagnosing the case 
as business men to whose hands those vast interests are intrusted, count 
the possible cost of the medicine. 

The Oakland episode is yet green in the memory of many, but it may 
serve my purpose as a present illustration to invoke its history. It will 
be remembered that, in order to bring a recalcitrant member into line 
with his obligations to the Union, the General Manager, under direction 
of the Executive Committee, reduced the rates in Oakland and environs 
ninety per cent, thus in effect suspending the tariff. Fully ninety per 
cent of the business within that area was immediately brought in for 
cancellation, to be rewritten at the reduced rates or extended for longer 
terms. A general scramble ensued. In many instances even the agents 
protested th it the increased labor of canceling and rewriting, the depri- 
vation of their usual revenue through no fault of theirs, justified them 
in declining to return the unearned commissions, and this in many 
instances was conceded. 

Is it unreasonable to anticipate that, in the event of the suspension of 
the Union, in part or in whole, similar results would follow? Let us 
therefore look at it from the standpoint of dollars and cents. Of the 
nearly twelve millions of dollars of premiums, making up the revenue of 
1891, it is fair to presume that twenty-five per cent (ninety-day) premiums 
are iia course of collection, or in the hands of agents. This vast amount, 
three millions of dollars, would be wiped out as quickly as the clerical 
work could cancel the outstanding policies, to be rewritten for extended 
terms, or transferred under open and free competition to the most active 
agencies. 

History repeats itself in the statement which I make, that, under the 
impression and belief that the war of rates which would ensue would be 
short, sharp and decisive, and a reorganization follow, many otherwise 
conservative companies would join in the scramble, to secure new busi- 
ness or protect their old at competitive rates. There would be no slow- 
sliding scale of reductions. As in Oakland, the " knife " would be lt put 
in" deeply, and on all classes of so-called "preferred" risks seventy- 
five per cent reduction in rates would be nearer the rule than twenty-five 
per cent. 



FIRE UNDERWRITERS' ASSOCIATION. 199 

The tension of Union requirements has been very great, and the 
reaction would be equally intense. Lest I might be considered an 
alarmist, or disposed to exaggerate the extent to which rates would go 
in the event of a disruption, I am content to let my first figures of cost, 
three million dollars, stand. The next, or concurrent with the move- 
ment in rates, will be the dealing with agents. To make ourselves " solid " 
with the best of these important factors in the practical development of 
our business, quick haste would be made to increase their commissions, 
ostensibly because of their reduced incomes brought about by the action 
of their principals ; an increase of five or ten per cent in this important 
feature in our practical work, and this upon a reduced revenue, would 
be a minor quantity to consider. As I shall treat of the relations of the 
local agents to the compact later on, I now only make this passing 
allusion to its effects upon the commission question. Another impor- 
tant quotient would be the additional expense for special services to quickly 
cover the ground. To bring my figures into practicable form, I add to 

loss of actual premiums on outstanding business $3,000,000 

Five per cent additional commission on residue 450,000 

Five per cent for additional services (temporary) of special 

agents and traveling expenses 450,000 

Or say in round figures $4,000,000 

as the cost of the medicine to treat with heroic remedies the patient 
whose ailments are not mysterious, are easily diagnosed, and only need 
faith cure and tonics to put it in the most satisfactory condition. 

It is needless to point out that the apparent pro t of seventeen per 
cent under the Union dynasty would speedily disappear, or the figures 
reappear on the debit side of the account. Shall we go on, knowiug that 
we are nearing a crisis which may at any time bring about the evils I have' 
apprehended, determining in our own minds to "protect our business " 
by the same methods as (it is alleged) our neighbors do, or supplement 
the prosperous record of 1891 by "renewing the oath" of fealty to the 
rules of the Pacific Insurance Union, in spirit and deed, with which to 
commence 1892, and until another legislature shall tell us by legislative 
enactment whether we shall still have the right to combine in those 
organizations so necessary to our well being. 

The management of the Union is in earnest in its efforts to investigate 
and correct complaint's of infringement of rules. I violate no confi- 
dence in quoting from a circular letter from Manager Duval bearing 
upon the subject : 

"For the best interests of all, the General Manager personally 
requests that members will report promptly all indications of deviations 
in any form from the rules of the Union. 

"Careful instructions to special agents, solicitors and employes is 
earnestly requested. 



200 SIXTEENTH ANNUAL MEETING OF THE 

" If members will report to this office : 

" Every demand from a local agent for excessive compensation ; 
''Every demand made by a solicitor, or 'employe acting as a 

solicitor,' for direct payment of commission ; 
" Every case where payment of rebate to the assured by any party is 

suspected ; 
' ' Every suspected deviation in any form ; 

"Investigation and report will be made within the shortest time 
possible. 

" The General Manager believes he has the promise of the fullest 
co-operation of each and every member of the Union in this work ; and 
this circular is issued with the promise that suggestions, advice and 
information will be received in full confidence. 

" An immediate personal response to above requests will be greatly 
appreciated, as indicating the earnest desire of members to strengthen 
the hands of the Executive in every way at the present time. 

" So far there has been no hanging back by any one in any direc- 
tion, but it is important, for the conservation of business and the main- 
tenance of confidence throughout the jurisdiction of the Union, that all 
incorrect practices be firmly, decisively and promptly dealt with." 

Since the circular letter was issued in October of last year, I learn on 
inquiring of Manager Duval that 207 complaints have been filed with 
him. These do not include complaints to the Portland and Salt Lake 
branches. 

This would seem to give color to the theory that the complaints of bad 
'faith are greatly exaggerated. There are, unquestionably, violations of 
Union rules by division of commissions, rebates, and other irregular 
methods for obtaining business, to a greater degree than these figures 
express. 

Nevertheless, I give it as my opinion, and find endorsement from a 
number of thoughtful observers among my fellow members, that good 
faith in its entirety is the rule rather than the exception among the 
rank and file of the profession. 

I should indeed ignore the selfish motives in human nature if I be- 
lieved that absolute good faith prevailed everywhere. The most, per- 
haps, that we may expect to accomplish is to " raise the percentage " of 
good faith. 

It is my desire to make this paper of practical application. I have 
thus far endeavored to show the value of the Union to " Underwriters of 
the Pacific Coast" as a whole. 

The officer or manager, looking over the results of his business for the 
past year, can each for himself see where adverse conditions would have 
effected his returns, and, if he has been disposed to extend his business 



FIRE UNDERWRITERS' ASSOCIATION. 201 

at the cost of his pledges to the Union, whether the unenviable noto- 
riety acquired does not offset the results to his business. With each of 
these the matter may be left ; but to the field men and the working 
forces of the profession we may come a little nearer 

The special agent as an educator has largely the interests, or I may 
say the working elements, of the Union in his hands. To his ears more 
than to those of his principals come the complaints of agents concerning 
irregular practices, and to such practices on the part of rival agents are 
often attributed the falling off or non-receipt of business. The special 
wants to make a record for his company, and if he is not made of tough 
fiber (morally) may encourage or wink at retaliatory measures by his 
agent, thus adding to the causes which I have endeavored to set forth as 
threatening disaster to all interests. It should be his duty, as far as 
practicable, to analyze these complaints, which in a large majority of 
cases will prove to be groundless ; to condemn all measures not strictly 
in good faith toward his principals and to the Union. A business built 
up on any other than legitimate methods is as a rule uncertain and irreg- 
ular. The customer placated by the rebate of a portion of the agent's 
commission is always in the market for further concessions. The spe- 
cial who expects to make a life service of his profession, and rise on the 
ladder of official promotion, should build up a reputation for honorable 
and strict dealing with his company, his competitors, his agents, and 
with the public. Sharp practices, chicanery, back-biting and double- 
dealing will not bring staying powers ; they will not win in the long 
run, though they may bring temporary success. 

Just here I may be permitted to quote from a paper read by President 
Crosby before the New England Exchange, which comes to hand in the 
columns of the Insurance Monitor of New York to-day : 

"The on'y honorable position for an agent representing two or more 
companies is to receive the same money consideration from all. The 
offer to give an extra consideration is in fact a bribe to the agent to be 
disloyal to companies he is bound iu honor to faithfully represent. The 
effect is demoralizing. The agent has been taught by the company that 
money, even at the sacrifice of honor, is the primary consideration ; and 
many a company will have only itself to blame if it finds its agent as- 
sumes risks simply for the sake of his commission. The underlying 
motive which prompts the offer to an agent of compensation in excess 
of that paid by an associate in the agency is of the lowest order, and 
not in accord with the high character of our companies and the loyalty 
and good faith existing between our members. There will always be 
favorite companies and specials in every agency. Ability to carry large 
lines, a small prohibited list, inclination to help an agent upon risks hard 
to place, an absence of instructions to cancel or criticism of risks, and last 
but not least the frequent visits of a bright, cheery, intelligent special 



202 SIXTEENTH ANNUAL MEETING OF THE 

agent, — these are all straightforward business methods, — always did 
and alw r ays w 7 ill have direct, positive influence in locating the position of 
companies in an agency ; but the special who visits an agent and offers 
five or ten per cent additional commission for business, a money bribe 
to be disloyal to his other companies, does not show ability or great 
sagacity. A clerk on a salary of five hundred dollars a year could do 
this work just as well. It requires tact, judgment and ability of a high 
order to place and keep a company in the front rank on the basis of 
equal compensation. 

"Not a single argument can be offered in defense of large and une- 
qual commissions. Business prudence, interest of our agents, loyalty 
and good faith toward our companies and our associates, all cry out in 
loud protest. As a business question it is vital. Sharp competition in 
all classes of business at the present time demands careful and prudent 
management. Our profession is not an exception. We come in con- 
tact with a large and increasing competition from a class of insurance 
companies doing business without any or at only slight commission ex- 
pense ; and yet, knowing this, by our action w^e are widening the gulf 
by increasing the cost. Can there be any question about the ultimate 
result of a competition between companies paying no compensation to 
agents, or at most only slight, and those paying from twenty-five to forty 
per cent commission ? Then, again, if the rates are such as to warrant high 
commission, they are too high and should be reduced. It is for the in- 
terests of our agents that commissions should be moderate, as large com- 
missions encourage and build up brokerage business. Many of our 
agents tell us that their net income is less to-day than when the com- 
mission was ten per cent. If I was an advocate and insurance agents 
my clients, I would use my influence in the direction of modified and 
uniform commissions. Loyalty and good faith between the members 
demand that we look the situation squarely in the face, and see if we 
cannot place ourselves in a position of equality one to the other." 

I have left, to this closing page in my paper, comments on the local 
agent to the Union, though in doing so I do not mean to imply that I 
believe these interests are of lesser importance. Indeed I contend that 
the local agent has more at stake in the perpetuating of the Union than 
has his companies. 

Operating over a wide field, from wmich the sources of revenue are 
drawn, the company in an emergency may look with complacency to the 
loss of business of a single agency or of an entire section. 

I have already alluded to the non-tariff views of many companies, who 
would, except for the restraining powers of our own peculiar Pacific 
Coast organization, be only too willing to enter the lists in order to 
lessen the power of their competitors, or add them to the number of 
retired or retiring companies. 



FIRE UNDERWRITERS' ASSOCIATION. 203 

But, to the local agent his business in his limited field forms the 
source of his individual income. The possible revenue is limited ; he 
cannot well add to it by reducing the rate. To him a suspension or war 
of rates means certain reduced revenue, consequent reduced commission 
earnings, and increased efforts and expense to maintain the balance of 
the business on his books. 

Having been at one time a local agent, I believe I fully understand his 
feelings, his struggles to maintain the old or build up new business, and 
to meet the demands of his principals in the face of constantly increasing 
competition. He is often between two fires, — the bribe-offering special 
and the rebate-demanding customer. He should with emphasis condemn 
both, lay the facts fully and promptly before his company manager, and 
invoke the disciplinary aid of the Union to protect his business against 
the offender. 

My personal knowledge of a large portion of the men holding special 
and local positions in the field leads me to believe that those who are 
derelict in their obligations form a minority, but still an important mi- 
nority, of the rank and file; that the vast majority of the army of agents 
are loyal to good practice in every particular, and as conscientious and 
thoughtful a body of men as can be found in any section of the Union. 
To all these I repeat that their welfare, and that of all underwriters 
of the Pacific Coast, is largely bound up in the maintenance of the 
Pacific Insurance Union. To permit its disruption, with the expectation 
that at some time in the near future a kindred organization would be 
resurrected from its ruins, would be wasteful beyond measure. 

To you, my fellow-workers in the special and local fields, are largely 
intrusted its practical duties. May we not then, reviewing the more fav- 
orable conditions in our Pacific Department than are enjoyed by our 
brethren east of the Rocky Mountains, support each other in all good 
practices looking to the maintenance of these conditions, so that the 
crisis may not be reached here, when officers and managers shall be 
called together to consider the question which I have taken as the text 
for my rather rambling paper, After the compact, — What? 

GEO. D. DORNIN. 

(Applause.) 

The President — After the Compact,— Another One, 
would be a pretty good title. 

After the gloom induced by the prospects of Mr. 
Dornin's paper, or the prospects of a disruption of the 
Union, we will turn to the pleasant feature of our annual 



204 SIXTEENTH ANNUAL MEETING OF THE 

meeting, and that is the reading of the California Knap- 
sack, by Mr. George F. Grant. 

Mr. Grant — Seeing Mr. John Cofran there reminds me 
of a story which, while it is not in the Knapsack, I 
would like to relate; however, it is in print in another 
insurance periodical, and the story runs like this. It 
illustrates the advantage of advertising your company. 
The Hartford Insurance Company got out a fine large 
photograph of the Grand Old Man of England, which 
was distributed over New England and other places ; and 
one day at a little school exhibition the selectman of 
the combination suddenly said to the children, " Who is 
Gladstone ? " A little girl back in the room very 
anxiously put up her hand — she knew all about it, you 
know — and replied, " The President of the Hartford In- 
surance Company." 

Vol. XVI. CALIFORNIA KNAPSACK, 1892. No. 1. 

EDITORIAL. 
As a matter of course, the editorial of the Knapsack is intended as a 
moral and philosophical guide, but a guide to the young only. This is so 
for two reasons, the first being that the simple fact of my having lived for 
more years than the boy pupil gives the advantage of an experience which 
he cannot claim : hence he takes my advice, believing it to be wisdom, 
and has faith that my deductions are sound ; secondly, my elders — bless 
their intellectual bodies— have no use for advice in their business. 

George F. Grant, Editor. 



THE ' ' FUDDYDUD. ' ' 

Now, in this edition of the Knapsack, it will be my object to warn my 
young friends against a common condition of mind, which, unchecked 
or unrestrained, leads on to a disagreeable habit of thought, and in time 
may develop the " Fuddydud." A " Fuddydud," as I know him, is a 
man who shares an opinion with himself but with no other person ; 
still he is quite willing that everybody should know what his opinion 
is. As there are no female " Fuddyduds " there is no propagation of the 
species. He is not confined to any trade, profession or calling, and his 
presence among underwriters is merely incidental. Although, according 



FIRE UNDERWRITERS' ASSOCIATION. ' 205 

to holy writ, " A fool is known by his folly," a young fool often escapes 
notice; so with the "Fuddydud;" he is not ripe as a rule before the 
noontide of life. The signs whereby you shall know him vary, and I 
will cite but one or two for purposes of recognition. At a meeting of 
importance called to consider some matter of mutual interest, at a 
critical crisis he will speak to the " question " at some length and get 
the eye of the chair at least three times : thus he can ring the changes 
on his individual opinions without stint, and he contrives to lend a 
humorous turn to affairs by a pun or a joke, which was jolly before it 
had the grippe. The "Fuddydud" always attempts to wear what is 
known as " a merry twinkle of the eye," but which is more likely to be, 
as Hamlet says, "a fitful havior of the visage." He is profound on sub- 
jects where personal experiences are allowed but dumb and silent when 
quick wit and decisive action are most needed. There are moments, 
however, when he shines, and that is when he is acting as a peacemaker ; 
but, my young friends, the fact remains, that you can be a peacemaker 
without being a " Fuddydud " 

There are a great many good people who do not know a "Fuddydud " 
when they meet one, and they misjudge him, classing him in their 
minds as a self-opioniated ass or an egotistical bore, or some such com- 
mon-place type, which is wrong and really an injustice to the " Fuddy- 
dud," who is of a different species and a higher family. One pleasant 
feature of the case is that oftentims those who knew him well before he 
contracted the habit are blind to his " fuddydudism, " and see him only 
as they used to know him in the golden past, when his large heart and 
broad views gave joy and satisfaction to no end of friends. My object, 
my dear young friends, is to warn you while there is time, just as I would 
advise you to be grammatical in your speech, because it is the habit of 
good society, or because it saves you a burning blush of shame-faced con- 
fusion, as is the case when your honest-hearted girl corrects your 
English. There is one kind of " Fuddydud," however, with whom I 
have no patience : he is the bold, aggressive bulldozer, who, knowing of 
his "fuddxdud" habit, still jams it down your throat, so to speak, in 
order to see you wiggle, just as little boys cut angle worms in two ; but, 
after all, dear friends, if you are growing into that kind of a man, it mat- 
ters little what the Knapsack thinks or has to say on the subject ; a spade 
is a spade, and a brute is a brute, the world over. 1 have been told that 
the most offensive kind of a " Fuddydud " is one who edits a paper. I 
have had so little experience in such business that I do not know, but 
really I hope it is not true. 

A CASE OF AVERAGE : A COLUMBIA RIVER YARN. 

Marine men will tell you that average is intimately connected with 
ships ; so the subject of this sketch has a like close relation. It will be 



206 SIXTEENTH ANNUAL MEETING OF THE 

seen, that in this, as in every attempt to adjust the difficulties of the situ- 
ation, it usually proves disastrous to some one, though in this instance 
it was one of peculiar hardship. "Bill, and as fine a sailor lad as you 
ever see, came aft and reported sick. I asked him to say how he felt, 
and he tells me near as he can. I takes the book out of the medicine 
chest and looks at the different numbers to find his case, — and it was 
pretty hard, because he felt bad a good many ways, — when my eye lights 
on number fifteen; an' I says, ' my boy, here is the stuff to fix you all right. ' 
So I takes the bottle out, and 'ere was a go : the bottle was empty. So 
what does hi do : hi gives him an arf a teaspoon of number seven and an 
arf a teaspoon of number eight ; and blast my bloomin hi if the bloody 
fool didn't die in fifteen minutes." 



THEN AND NOW. 

iSyi. — The following was received by the company three days before it 
was able to announce the amount of its losses and their effect upon its 
financial position : 

" Covington, Indiana, October 10, 1871. 

" Home Insurance Co., New York. 

" Gentlemen : Believing you are heavy losers in the Chicago fire, and 
having earned something as your agent, I feel like giving something to 
assist you to go through, and if you see proper you can draw on me for 
one hundred dollars, which will be honored at sight. 

li Yours respectfully, 

"Jas. N. Duncan." 

Let us hope the company gave that agent a share of its new stock issued 
soon afterward; there could be no question about the loyal support of 
stockholders with that spirit. 

1891. — A few days ago a letter was received from an agent in a Coast 
town of about two hundred population, whose business for the company 
addressed has amounted to two risks per annum. He writes: "I fell 
down yesterday and broke my wooden leg so bad that it can't be repaired, 
and have no means to buy a new one. Therefore I would respectfully 
ask of you to send circular letters to your agents asking them for what- 
ever they can donate towards the purchase of a new leg, which will cost 
fifty-five dollars. You know that the business was dull this year. 
Hoping you will do all you can for me, etc." 

For obvious reasons the name and residence of the agent are withheld, 
and it is not intended to refuse him the sympathy to which his misfor- 
tune entitles him. But his apparent views upon the brotherhood of 
man, as exemplified among fire insurance agents, suggest the propriety 



FIRE UNDERWRITERS' ASSOCIATION. 207 

of inserting a paragraph in Otey's Manual, headed, " Subscription 
papers prohibited ! Cannot get enough to make an average." 



CLINCH THINGS ! 

There's a motto a manager once gave to me, 
A man full of brains you can readily see. 
Experience and knowledge in him are combined, 
A man of broad views and talent of mind, 
Successful in business, ranking high in this State. 
He said to me once, " Put this thing on your slate ; 
Should you wish fame to acquire, success to attain, 
Clinch things. 

" If in business transaction a point should arise 
Which might be construed anibiguous-wise, 
And you may be enabled to fully define 
The point at once clearly, and bring it in line, 
Yield not to the impulse and matters delay, 
But define your point then, for that is the way 
To clinch things. 

11 Should an agent default, and you're sent to the scene, 
And he meets you with face all smiling serene, 
Let him know you are there for justice and right, 
And keep him in hand by day and by night 
Till success you've obtained and your money's secure ; 
T'is the only true way the evil to cure : 
Clinch things. 

" Should a loss have occurred, and you're sent to adjust, 
Don't look on all claimants with eyes of distrust, 
But keep them wide open ; with your ears do the same ; 
Then if things are crooked you'll drop on the game; 
Perpetuate testimony, examine the facts, 
And success should attend every one of your acts : 
Clinch things. 

11 Put not off 'till to-morrow what you should do to-day 
Is an excellent motto and well in its way ; 
For things once deferred may ere long disappear, 
Which makes it more urgent, and the motto is clear : 
Delays are oft dangerous, let promptness prevail, 
And never admit there's such word as fail : 
Clinch things." 



208 SIXTEENTH ANNUA I, MEETING OF THE 

The cupidity of the average loan company is admirably distanced in 
the case of a Utah farmer, who recites that the agent agreed to give him 
Ir^ooo insurance for fifty-three dollars. But when he received the policy 
he found, much to his disgust, that it indemnified him to the extent of 
$1,500. He writes, "This wasn't your agent's agreement, and if you 
don't fix it right I won't keep your policy. If that's the way you do your 
business I don't want anything more to do with you." And who ques- 
tions the moral hazard of Utah ? It might be well to add in explanation 
that the premium paid was for $1,500 insurance, and that the company 
with characteristic exactness rectified the error. 



AN OAKLAND JOKE. 

Perhaps you know that a number of us insurance people live in Oakland, 
and get the evening papers at the ferry just as we enter the slip. The 
other night I went up to take a Bulletin, when I found a brother under- 
writer in earnest conversation with the pilot. He was leaning heavily on 
the pile of papers. "Do you own these papers?" I asked. "I claim 
no title to them," he said. "Well, you appear to have a big lien on 
them," I answered. He removed his elbow, and then we went forward 
and moved both our elbows at his expense. 



If I did not have a pretty good opinion of my ability to impart 
instruction to the local agent, the following story would lose much of 
its point. 

Recently I made a good find in a town near by, being an honest, 
intelligent, earnest young man, with good connections, who really 
wanted to be a local agent. Gladly I passed every moment of the day 
"talking shop." We went over the rate book from the "Alphabetical 
Table of Hazards " to the " Short Rate Cancellation List." He hung on 
my words and asked questions by the gross ; he followed me to the cars 
and shouted out a last query as I stood on the rear platform of the 
moving train. 

Within twenty-four hours after I reached home I received a letter full 
of enthusiasm, but tinctured with doubt. He told of a good lady friend, 
a property-owner. She had a dwelling in town worth at least four 
thousand dollars, and he could insure it on one condition, and it was 
this condition which worried him. He had hardly slept a wink think- 
ing about it ; for it seems this lady also owned a country mansion worth 
twelve thousand dollars, which ought to be insured for at least eight 
thousand dollars, and she would insure the town house if the country 
dwelling could also be insured. Would I be willing to do this ? asked 
my unsophisticated agent. Would I, for the sake of a starter, do him 



FIRE UNDERWRITERS' ASSOCIATION. 209 

the favor to break the rule arid let one hand wash the other ? Would I 
take the country risk if the city risk was thrown in ? Would I let him 
know at once ? 

I beg to assure the Knapsack that I felt faint for fear some fool of an 
agent, with no sense, would scoop that abominable country risk before 
mail time. 



c. P. FARNFIELD. 

Far away on the desert, where Arizona's shimmering sands are 
tinted by the sunset to a lurid hue ; where Yuma's burning plains 
stretch far beyond the horizon ; where the sullen Colorado rolls, — there 
died our friend, alone. No mother's words of comfort, no sweetheart's 
soothing touch, were there ; but in solitude and in silence he passed 
over the Dark River to the Unknown Land. The dismal hum of the 
wires was his only requiem, while the winds of the desert moaned and 
moaned, as if for our departed friend. 

Farewell, Farnfield ! May the light of your generous nature illumine 
your path to the Great Beyond. 



Texas is full of small general agents, many of whom do their special 
work by mail. I know of one of said general agents who made a cer- 
tain appointment by letter. Not hearing from the new agent in six 
months, he proceeded to take the train to look up his supplies. Arriv- 
ing in the town he made inquiries for Mr. So and So, and found that the 
gentleman had sold out four months before, and had gone away. After 
some difficulty he found the purchaser of the business, and made 
inquiries for his supplies. 

"Don't know anything about any supplies. I bought Mr. Blank's 
real estate business, and he threw in some old insurance blanks, which I 
burned up." 

"But surely you didn't burn them all up. How about the policy 
blanks and my register, — a book, a good big book, about that long ? " 

" Oh, let me see. I think there was some kind of a book marked 
' register' on the outside. I took that over to the hotel and sold it for 
one dollar." 

Repairing to the hotel our general agent found his "book" being 
used as a hotel register, with six pages of arrivals already "in force." 



Down in a certain southern field a peculiar class of risks familiar to 
you all are known as " female boading-houses," and take twice the rate 
of ordinary dwellings. I was walking about town examining our busi- 
ness with the agent, when we passed a comfortable two-story dwelling. 



210 SIXTEENTH ANNUAL MEETING OF THE 

Upon making inquiry why said dwelling was not covered by a policy in 
my company, the agent replied : 

4 ' The fact is that dwelling belongs to my widowed sister, and as she 
had more room than she wanted she took our two schoolmarms to 
board. You see the rate book says that female boarding-houses shall 
take double the dwelling rate; and my sister just couldn't stand it." 

Who says the gentle local is not unsophisticated ? 



It was an Oregon agent who sent us a daily report of a hotel risk, 
remarking at the same time that the competition for the risk was very 
strong, and that in order to get it he had been obliged to shave the rate 
a little, but that the risk was O. K. There being no diagram with the 
daily report we inquired of him the board rate. The answer came 
promptly, " Board rate one dollar per day or four dollars per week. " 
Cheap country hotels are now on the prohibited list. 



HOW I MADE A FRESH START. 

I was expelled from a college at an early date in my scholastic career, 
and came West. My father, instead of the customary shilling, cut me 
off from the rest of the family with a check for one thousand dollars. I 
invested this amount in a retail cigar stand, and in six months it was in 
the hands of the sheriff. Having taken a law course for a fraction of a 
term, I next opened an office. The rent was cheap, moreover, it was 
never paid. I dined with friends, — or not at all, — went out early by 
night, and during the day awaited the client who never came. Eviction 
being a difficult matter in this free and enlightened country, I kept that 
office very nearly ninety days. At length, returning thereto as usual 
one evening to woo the drowsy god from a luxurious couch, consisting 
of a seedy overcoat on pine boards, I found the lock changed and the 
door decorated with the sign "To Let." Clearly I had to enter other 
professional ranks. I abandoned the law, also the overcoat. 

My fidus achates as a last resort obtained me a job on one of the cable 
cars. It was harder work than the law, but paid better, and besides one 
had the wherewithal to gather in a convenient coffee or other liquid 
refreshment saloon with a few uniformed and uninformed companions 
and talk over the stirring events of the day. For over a month I enjoyed 
at least six hours' rest per night, and on a mattress at that, not exactly 
downy, but still more comfortable than the soft side of an office floor. 
But I could not overcome a regular tendency to delay the first morning 
trip, sometimes an entire revolution. I had a row of colossal propor- 
tions with the mustached lady-killer who punched fares on "our 



FIRE UNDERWRITERS' ASSOCIATION. 



211 



train," and ended up my tramway career (no joke intended) by contriv- 
ing to spill a Chinaman very flat over a considerable section of one of 
the cross streets. 

I again sought out the friend of my childhood. We had a very glum 
interview. He told me that I had better far have been hung at an early 
age, say shortly after birth; that I would probably come to the gal- 
lows finally; and I admitted the justice of the remarks. He said that I 
was of no use to myself or any one else, and I heartily agreed with him. 
Finally he entered a deeply contemplative mood, and I helped myself 
liberally from his sideboard. At length my friend spoke : " Yes, I 
suppose any fool could tackle that, if he has'nt brains enough to make 
a respectable living. Meet me here to-morrow morning. I want to see 
a friend down town." 

I met him. It was arranged. Here is my card. 



N. O. DUFLICKER, 

Agent and Solicitor 

Damfino Insurance Co. of Yanktown, Dak. 

Capital f 10,000.00. 



THE ART OF SOLICITING. 

Now, with all due regard to the contemptuous opinions of the kind 
friend who contrived my entry on the wild, tempestuous sea of solicita- 
tion, insurance- wise I have not found the pursuit of the fleeting risk as 
plain sailing as he evidently imagined. In the first place all my fellow- 
mariners of the same craft were brimful of voluntary suggestions in , 
regard to the business as a science, but clam-like indeed in reference to 
the bait they employed, or the locality of their own private fishing 
grounds. Dropping the nautical simile as entirely inappropriate, I am 
free to confess that I found the enterprise was in the line of sawing 
wood, — regular old pine-knots, and no set to the saw either. 

On the other hand, the manager, assistant manager, manager of the 
city department, and office manager, were very kind about proffering 



212 SIXTEENTH ANNUAL MEETING OF THE 

the most copious advice concerning methods and possible clients. In 
fact the various specimens of valuable advice received during my first 
week of employment reminded me sharply of Mark Twain's experience 
with a cold. The manager first took me in charge, and in a kindly, pa- 
ternal way, said : " My boy, the secret of the whole thing is talk. Go 
at your man in an affable, sociable sort of way, and talk him into sub- 
mission. Above all don't give him a chance to say 'No.' If he shows 
negative signs, change the subject ; talk of sun spots, the aurora bore- 
alis, give him a line or two from 'Hernani,' but don't let him say 'Xo.' 
Keep at it, my boy, and you will end by bringing that risk into the 
office." 

As I left the sanctum, with glorious vistas of immediate success in mv 
hopeful imagination (for if there is one thing I can do it is talk), I met 
the assistant manager. He drew me aside and said : "So the chief has 
been giving you some advice, has he? Well, now, there isn't a more 

capable underwriter on the Coast than Mr. ; we're all very proud of 

him, but (in a stage whisper) he hasn't done any city soliciting since 
Adam was a little boy. If you start in by talking too much you'll cook 
your goose at the outset. The first business man you try it on will 
wheel around in his chair and point to an illuminated sign over the 
cashier's desk, reading, 'Time is money,' 'This is my busy day,' or 
something similar. Mind that now, young feller, and the sooner you 
learn it the better, for talk won't go in these times." 

I thanked him and started back to my desk, — or rather to my third of 
a desk, — or, to be more exact, that particular fraction of the middle sec- 
tion of a high 2x14 lunch-counter-looking sort of table in which I had 
been provided with a letter drop and a tin sign. There I met the office 
manager, who said, " What do you know about rates ? " I told him that 
I didn't know an adjective thing. "Well," he said, "you can't expect 
to get business unless you can quote rates like a tariff book. I tell you 
there's a good deal in knowing how to figure exposures to the best 
advantage ; when to mistake a rear stairway for an open platform, 
roof cornice or bridge ; and how not to see a terra-cotta chimney. This 
does the trick every time. And then you want to learn how to lop 
five cents off a three-year rate. Come with me and I'll explain the 
whole business." * * * 

The doctor pronounced it a mild attack of brain fever, and I got down 
to the office again in three or four days. On the street corner I met 
the manager of the city department. Said he, " Well, how are you do- 
ing?" I told him I had done pretty badly so far. He replied, "I 
thought so. Let's go and take a drink." Arrived at the dispensary he 
entered a private room, invited me in, locked and barred the door, and 
having stuffed a paper in the keyhole asked me, " What's your commis- 
sion ? " I told him I was to be paid a salary. " Of course," he said. " I 



FIRE UNDERWRITERS' ASSOCIATION. 213 

know that ; well, how much is it?" I answered, " Twenty per cent." 
11 Now," he said, " I'll tell you the only way to get business. We'll make 
it twenty-five. Don't you go near your man until all the other fellows 
have had their fling. Let them figure on the rate till they've got it 
down as low as the book will let 'em, and bothered the old party to death 
in the bargain; then you step in, get his starboard ear, and offer to give 
him—" * * * 

That was a couple of years ago. I'm still in the business, and have 
only changed offices five times. Each time I changed it was to receive a 
larger " salary," — except the last. I left my last office because the man- 
ager had the infernal impertinence to send a collector after a bill that 
was seven months over due ; and no gentleman could stand that, you 
know. 



Agent B reported that he failed to secure a line on Dr. 's new 

farm dwelling because he charged the Doctor seventy-five cents for his 
sheet-iron chimney, that the Doctor had had made from his own plans, 
earthquake proof, and in his forcible way said that he would not insure 
with any fool company that did not know that his sheet-iron chim- 
ney was not a stove pipe, and was much safer and better than a brick 
flue. The agent argued and reasoned, but it was no go. 

A few weeks later the Doctor called on agent B and said : " Well, 

I got my house insured and did not pay seventy -five cents for a stove 
pipe. The farm-property agent of Gather Them In & Co. looked at my 
sheet-iron chimney and said that his company preferred that kind of a 
chimney to brick, being earthquake proof, was much safer, and gave me 
a policy." 

Agent B snuffed the undercutter in the air, and notified the P. I. U. 

The P. I. U. called on Gather Them In & Co., and on examining the 
application found that not only had the Doctor paid seventy-five cents 
for stove pipe, but had also paid a reasonable survey fee, and was happy. 
Now, Mr. Knapsack, are there not many cases where the ability and 
push of the bright and industrious agent is mistaken and reported by 
the reach-his-office-at-nine-o'clock-in-the-morning-soft-chair-wait-until- 
they-come-in-agent as undercutting ? 



THE SPECIAL'S WAIL. 
An active special who had been engaged in various lines of work before 
joining the Grip Brigade says that when a young man he wanted to be 
a fireman on a railroad locomotive, as he had observed that when the 
train came in or went out the fireman did nothing but " ring the bell." 
He got the position, but his experience was that he had to get down out 
F. u. A. 14. 



214 SIXTEENTH ANNUAL MEETING OF THE 

of sight in front of the furnace and shovel coal between stations. He 
tired of this position, and became a local agent. Here again he noticed 
that the special agent seemed to do nothing but "ring the bell" when 
in town, and his ambition was only satisfied when he secured a place as 
special ; but here again he found that in the work of a successful special 
there is more coal-shoveling than bell-ringing. 



The following letter from a Chicago special will prove spicy reading. 
He adjusted losses in a camp for several companies, some of whose 
agents report Bast and some West: 

Dear Sir: Many thanks for your letter of introduction. This is a 
great place and a great people. The first day of my arrival I was 
presented to ten citizens, classified as follows : three generals, four 
colonels, two captains, one private. 

I hardly liked to ask these officers where they won their straps, but I 
learned incidentally that one of the generals got his title from the fact 
that he was "general freight agent" of the P. I. & Z. Railroad, and that 
all of the colonels were from Kentucky. This seems to account for 
the " C. J. Society," of which I soon became a member by acclamation. 
The only qualification necessary to join the " Corn Juice Society " is the 
ability to take seven drinks between lunch and dinner. I passed the 
ordeal all right, but have since resigned. 

The one private mentioned is your agent, who seems to have tactics 
at his fingers' end. With his assistance I was enabled to adjust the loss 
with satisfaction to all concerned. (Loss papers herewith.) 



SECOND CHAPTER OF THE BOOK OF THE TABERNACLE. 

And in the ninth month of the year it came to pass that the multitude 
began to mutter and to talk as is their custom at certain seasons, saying, 
" Verily, verily, some amongst us are possessed of devils ; let us cast 
them out." 

And the headmen called a meeting of the tribes, and they met in the 
tabernacle ; and lo and behold one of the headmen stood up upon his 
feet and spaketh as follows: " Bismallah" (which being interpreted mean- 
eth, "The name of our tribe is mud"). "There's trouble ahead and the 
devil to pay;" and he forthwith made charges that certain Philistines 
had sold themselves for thirty pieces of silver, and furthermore they 
had broken the laws that they themselves had set up, and promised to 
obey, and they had no honor in them." But those that were guilty ex- 
cused themselves, saying, "Others do so and we are all the same," and 
so made liars of themselves and of their henchmen. And the headman 



FIRK UNDERWRITERS' ASSOCIATION. 215 

spaketh further, saying that unless the men who did these things were 
put to the sword, verily, the tabernacle would bust wide open with 
an exceeding loud bust, and they would all be driven out and have to 
eat grass for a living. Duvallah Great is the name of the (contingent) 
profit. And there was great indignation; some cried, "Who, who," 
which being interpreted meaneth "Rats." But verily they were cast 
down and did wring their hands, for they did not want to browse around 
and eat grass for a living ; and they called upon the High Priest with 
a loud voice, — as is the custom at such times ; and the High Priest 
anointed himself with oil and put on fresh raiment, and he gave the 
multitude soft words and soothed them, saying in a loud voice, " Verily, 
verily, I will smite these people hip and thigh, and I will hang those 
that have sold themselves as high as Haman ; and I will do this and 
I will do that, for my power is great in the land. Only give me time 
and all will be well." And the people fell on each other's necks when 
they heard these words, and dispersed with great joy, and went out into 
the byways of the city and drank of the wine of Gilead, which is called 
cocktail ; and those among them that were guilty laughed the others to 
scorn behind their backs, saying, " What fools ! Verily, they] will walk 
in the straight and narrow path, and we will lie by the wayside and else- 
where, and will rake in shekels galore." 

And it came to pass that in the space of thirty days the High Priest 
called the multitude together again, the good and the bad, and said, 
"Verily, I have spoken unto these Philistines, and they have denied 
that they have sold themselves for thirty pieces of silver ; and verily 
they speak the truth, for they are not worth it, and they have been 
purified in the tabernacle, and the charges that you have brought 
against them cannot be, for they say that they are innocent ; and it is 
all right, and go home to the bosom of your families in peace, for there 
is no wrong in the land." And the multitude went home and sat in 
their counting-houses and thought, and some said "Itolymso," and 
others swore exceeding strange oaths. 

And at this time the High Priest dreamed a dream, and lo and behold 
the tabernacle was rent in twain, and he saw these Philistines that had 
been accused of breaking the laws dressed in sackcloth, and they had 
ashes on their heads ; and they were wandering about in desolate 
places ; and they wore even patches on their vestments, and their 
trousers were baggy at the knees, and lo, reached down only unto their 
ankles ; and verily they were eating the grass of the fields. And they 
all cried in a loud voice, " Woe, woe, give us but a drop of water, for we 
thirst." And no one had pity, and the scoffers cried, "What fools, 
what everlasting fools." And then the High Priest saw in his vision 
that they herded themselves together and raised their voices, and ran 
down a steep place into the sea and were drowned. 



216 SIXTEENTH ANNUAL MEETING OF THE 

An active agent in the San Joaquin Valley having had a number of 
policies returned to his company by an agent of a competing company 
in a German colony, visited the locality to learn the cause. The cause 
was a German agent. The A. F. A. called on his customers and found 
them in possession of the policies of an aggressive, well-managed com- 
pany, whose policies are adorned with the head of a celebrated but very 
ugly " chieftain." This gave a cue to the A. F. A. to work on, and tak- 
ing a recent importation from Europe aside said to him, pointing to the 
picture, ''That is the photograph of the president of that company. 
How would you like to have him settle your loss?" The reply was, 
11 Mein Gott, I no vants to settle mit dat kind of a mans," and immedi- 
ately gave up that policy and took the A. F. A. 's policy. Others did 
likewise, and in a short time a truce was had and an agreement made 
between the agents to respect each other's contracts. 



It was a sight to see the Monitor man eat crow pie. After sitting on 
the fence and holding up the pie labeled, "best pigeon pie," and after 
being sassy to the little boys who had no pie at all, suddenly he realized 
he had to eat it ; he never changed a muscle, but gulped it down. This 
was when Lowden got back at him for his criticism of the paper on 
"Manufacturers' Profits" read by the President at our last annual 
meeting. 

The ruling passion is strong in death ; and the Monitor man raised 
his hat to Lowden, and said, " We have always advocated this theory ; 
in fact, the senior editor of this paper converted George Washington's 
grandfather to the same thing." 



A new agent always wants to write policies ; of course I mean an agent 
new to the insurance business. One of this kind sent in his maiden 
effort with a pat-on-the-back sort of a letter with it. His " daily " read 
as follows : 

" One thousand dollars on household and kitchen furniture, bedding 
and such other articles as are contained in a family. ' ' In reply I asked 
him if this was intended to cover breakfast or lunch. 



In these days of pow-wow and chin-chin on the subject of credit it is 
refreshing to find that one office at least has the backbone to do some- 
thing. The following circular letter was issued last month : 

" It has always been a rule with this office, clearly and explicitly 
stated by 'Letter of instructions,' through correspondence, or verbally, 
with each and every agent, that the limit of credit which can be 
granted upon any policy, with the sole exception of insurance upon 



FIRE UNDERWRITERS' ASSOCIATION. 217 

farm property where a note is taken for the premium, is sixty days ; 
that, unless at the expiration of that time the premium has been col- 
lected, the agent must cancel and return the policy to this office, or must 
himself assume the credit to his client. Our companies are somewhat 
old-fashioned. They are not in the habit of giving credit upon agents' 
accounts, or, if they should, for not more than thirty days in any part of 
the country except upon the Pacific Coast. It does not speak very well 
for the Pacific Coast States and Territories, where the people are in the 
habit of claiming that there is more wealth per capita and less poverty 
than anywhere else in the world, that it should be so excessively hard 
to collect insurance premiums. The contracts subsisting between the 
companies and ourselves require the settlement of accounts within sixty 
days. The requirement has to be carried out literally, and when the 
day arrives the settlement must be made to the exact cent. You will 
readily see then how much we are inconvenienced by the failure of only 
here and there one agent to collect and remit promptly. The aggre- 
gate of these failures is sometimes a very large sum, so large that it 
occasions us very serious trouble at times. Honestly speaking, we 
believe it to be the result of competition, and of one agent trying to 
offer greater inducements than his competitors have been in the habit 
of doing, which, little by little, has led to this unfortunate situation. 
Of late there has been in many cases departures from the rule, and cer- 
tain agencies, instead of having paid up to within sixty days, are owing 
three and sometimes four months' balances. This may be in a great 
measure due to dull times and scarcity of money, more particularly so 
in the northern districts. If so, it is likely to be temporary only. 

"The commencement of another year seems to be the appropriate 
time to ask your kindly attention to this subject, and to state that we 
are compelled to insist upon a strict adherence to the sixty-day rule 
even though it should cause us the loss of some business. It ought not 
to, for every reasonable man must recognize the fact that the extended 
credit system is a source of great trouble, expense and loss of time to 
him. How much easier would his work be if prompt payment of 
premiums were a universal rule ; how many times does he have to call 
upon some of his customers ; how many extra miles does he walk or 
ride in doing so ; how many bills have to be rewritten, and how much 
time is taken away from the actual conduct of his business in the collec- 
tion of these deferred premiums ? The Pacific Insurance Union has 
tried to grapple with the credit question ; so has the Fire Under- 
writers' Association ; but both have failed. It seems to be an onerous 
undertaking for one office to make the attempt single-handed ; but of 
such importance is this subject, and so directly is it in line with agents' 
interests to cheerfully and heartily co-operate in reducing an evil which 
affects them, as well as us, so prejudicially, that we are emboldened to 



218 SIXTEENTH ANNUAL MEETING OF THE 

try the experiment and abide by the result, confidently believing that it 
will meet the views and wishes of all of our good friends. Let us there- 
fore reiterate the rule that all policies, the premiums upon which are 
not paid to you within sixty days from the date of issuance, be canceled 
and returned to this office, and ask for your close attention and co-opera- 
tion." 



The following is an exact copy of an endorsement received at the 
office : "In consideration of the sum of $330 additional premium paid 
by the assured, notice is hereby accepted without prejudice to this policy, 
as per diagraphm on back. Rate advanced to 565 per cent." Great 
Scott ! 



Tell me, ye winged winds, that daily 

Round me roar, 
Is there a spot where adjusters are no more ? 
Some pleasant fire-proof place. 

From oxygen quite free ; 
Where flames are never known 

And smoke they never see ? 

The wild winds dwindled to a whisper low 

And sighed their answer as they murmured, — "Yes ! 

But 'tis over the river, 

In the mansions of the blest, 
Where the Wetzlars cease from troubling, 

And the Treanors are at rest." 



The time has come to give to the Knapsack the story of my encounter 
with the cimex lectularious. It is true I had met him in a more or less 
familiar way here and there, but until now I had failed to be impressed 
by him, and had never felt a sensation of fear in his presence. The other 
incidents of the trip (for of course it was a special trip) were sufficiently 
varied and startling, but the whole would have been tame and soon for- 
gotten but for the cimex lectularious. It was just at the end of summer. 
There was but one train each day to and from Los Angeles, and by the 
time-card one could plainly see that from Modesto to Tulare the arrivals 
and departures were at unseasonable hours, A stay of twenty-four hours 
in each town and broken rest every night is enough to rasp the nerve 
and spoil the temper of the best natured man in the business. Such was 
my trip, and it was five o'clock one morning when I reached Visalia too 
early for breakfast and too late to go to bed, which I would have liked 



FIRE UNDERWRITERS' ASSOCIATION. 219 

well enough, for I had dozed against a stiff-backed day coach since two 
o'clock. It is plain to me now that I had no more sense than to wear 
myself out voluntarily ; and I was yet too new in the work to secure a 
good room immediately on arrival. During the day the usual inspection, 
adulation and devotion served to keep things going at a lively pace ; but 
after supper nothing but thoughts of bedtime and slumber were in my 
mind. I paid little attention to the landlord's words of apology, "the 
last room in the house, grangers' convention in town, do better to-mor- 
row," and all the rest of it. The room had a bed and a window; that 
was enough ; then again there was a mosquito netting like a huge tent 
over my couch, — the better for undisturbed sleep I thought. I did not 
even growl at the half inch of candle. What matter? I only wanted it 
long enough to strip off my day clothes. Oh, the delight of that half- 
minute of wakeful bliss just before your eyes close for the last time and 
your limbs stretch out in a cool new spot, restful and free. 

How long I slept I can't say, — perhaps two hours, — when of a sudden 
I was wide, staring awake ; no noise, not a sound, save a distant clock 
with a giddy, rapid tick, and yet I was alarmed, mentally disturbed. 
What was it ? I felt ' ' creepy, ' ' as the girls say ; before I knew it I was 
out on the floor with the candle lighted. I looked out of the window ; 
nothing to be seen but bright moonlight and black shadow. Uncertain, 
yet firmly, I inspected the bed. Horrors ! What a sight ! It was given 
over body and bolster to the cimex lectularious. He climbed the canopy 
in numbers. He was marshaled in company front on the pillow case, 
and performed military maneuvers on the counterpane. Hundreds, yes, 
there were thousands of them, every one at home and receiving visitors. 
To gather up my clothes and shake them carefully in the hall was the 
work of a moment. Descending, I found a knot of owl-like grangers 
talking mule. If there is an unprofitable subject outside a race-track it 
is horse talk. With some irritation I took a seat under the porch with 
my back against a post and my feet in a chair. I slept like a top until 
all at once my feet dropped with a dull thud ; and the voice of the clerk, 
he who had pulled away the chair, said something about ' ' time to lock 
up." For a few moments the resounding air was alive with my burning 
words, until the clerk, who was not more than half fullj realized that it 
was a sober man who talked so earnestly. With something of an 
apology he yielded the chair and locked me out of the hotel. As the 
sound of his receding footsteps died away I was once more asleep. The 
exact hour of my next awaking is unknown, but in a bewildered and 
helpless way I was conscious of much light without the power to distin- 
guish objects. While engaged in a futile endeavor to drive something 
from in front of my eyes I heard a deep voice growling out a demand to 
know what I did there. In time I beheld a person with a bull's-eye lan- 
tern. He proved to be the night-watch ; in fact the entire police force 



220 SIXTEENTH ANNUAL MEETING OF THE 

stood before me. He was uniformed in an Inverness cloak, slouch hat 
and carpet slippers, and was armed with a crooked-necked cane. I rose 
and requested the department to be seated while I related my story. 
When I told the experience with the cimex lectularious he was convulsed 
with laughter, and made such an outrageous noise that I was obliged to 
arrest him ; but soon he departed on his own recognizance in order that 
he might finish his beat. From time to time he returned, and each time 
woke me up to inquire how I was getting on now. On these occasions 
he swept my feet off the chair quite easily and seated himself for a chat. 

I was dreamily comparing him in my sleepy mind with the hero in 
the play called " Nick of the Woods." This hero held the stage during 
most of the performance, and moved about with a step which was often 
referred to as " soft as a panther's tread." While I was groping for infor- 
mati n which would explain why the Jibernanessy should carry a dark 
lantern I became once more conscious. This time my friend had chosen 
to seat himself without removing my feet, and while I struggled to 
recover them I talked some plain American language to more fully illus- 
trate what I thought. Imagine my surprise when a cheerful but strange 
voice replied in pretty much the same strain as the form of my own 
address. This voice gave evidence of indulgence in strong liquor ; and 
I was not much surprised when an invitation to go and take a drink fol- 
lowed. In order to gain time I engaged the last arrival in conversation, 
and soon learned more of his past, present and anticipated future than 
often falls to the lot of a mere chance acquaintance. After parrying the 
invitation to drink several times, my companion, after fumbling in his 
clothes, brought out a bright, shining six-shooter, which he held in a 
wavering, uncertain grasp, at the same time saying in a decided tone, 
" My young friend, you come along with me and drink." " Why, cer- 
tainly," I answered, springing to my feet, u which way ?" " This way," 
he answered, pointing his weapon over the face of the country. Grab- 
bing him on the off side of his pistol arm I helped him over to a grog- 
gery, which fortunately was closed. 

He was quite indignant that the barkeeper should dare to lock up the 
place, and commenced to get ugly. Acting on a thought I suggested 
that he should go to the barkeeper's house while I remained to keep 
guard over the saloon. After considering this proposal with solemn 
gravity he decided not only to perform his part, but to awaken the sleeper 
by a shot from his pistol. No sooner was he out of sight than I was 
back in my chair, again asleep. When next I woke it was from a shake 
given by the night watchman. "Did you hear that shot?" said he. 
"Come along, there is murder going on." As he sped away, his cloak 
flapping in the breeze he made, he looked not unlike one of Dore's birds 
of ill omen. I never saw him again, for at this moment the long whistle 
announced the approach of the train. Gray dawn had come; the hotel 



FIRB UNDERWRITERS' ASSOCIATION. 221 

clerk reappeared, and mechanically carried my chairs indoors ; the 
bus rattled up to the depot and rattled back again with nothing but a 
mail sack for its pains ; the night had passed; a day had dawned. 

When the livery stable man came down to the barn I was waiting with 
my grip. He drove me over to Tulare, and talked all the time. I could 
not even get a nod. At that time the crowning glory of Tulare was the 
Railroad Hotel, owned and run by the Southern Pacific people ; it was 
clean and wholesome. If I remember aright I went to bed at 10:30 in 
the forenoon, and never gave a sign of life until breakfast time next day. 
Twenty years of travel has never given me such a shock as that encounter 
with the cimex lectularious. 




THE BOGIE MAN. 

Come all ye little managers and listen unto me, 
A creature somewhat strange has come a sailing o'er the sea ; 
One like him you have seldom seen since first your lives began ; 
No wonder when you gaze on him you call him " Bogie Man." 

Hush, hush, hush ! 

Here comes the Bogie Man ; 

You'd best lie low, 

You stand no show 

Before the Bogie Man. 

He has the power to crush you all and make you quake with fear ; 
He has the calm and steady stare that makes you feel so queer ; 
He has taken in Macdonald, James and Carpenter as well, 
And has some others on the slate the British ranks to swell. 

Hush, hush, hush ! 

Here comes the Bogie Man ; 

You'll have no show, 

You'd better go, 

He'll bounce you if he can. 



222 SIXTEENTH ANNUAL MEETING OF THE 

He has some blooded backers who give the business tone, 
And when he plays at any game the counters are his own ; 
He represents more sterling wealth than any others can ; 
No wonder that you all bow down before the Bogie Man. 

Hush, hush, hush ! 
Her